STORY
The Bank of England has reduced its base interest rate by 0.25 percentage points to 4.25%, marking the fourth cut since August 2024 and the most rapid easing of monetary policy since the 2008 financial crisis. This decision by the Monetary Policy Committee (MPC), which voted 8-1 in favour of the cut, aims to bolster the UK economy amid slowing inflation and heightened global trade tensions. Inflation has declined from a peak of 11.1% in October 2022 to 2.6% in March 2025, approaching the Bank’s 2% target.
The recent imposition of tariffs by the United States has introduced additional economic uncertainty, prompting the Bank to adjust its growth and inflation forecasts downward. Governor Andrew Bailey indicated that further rate cuts could be considered if economic conditions continue to deteriorate. For homeowners, the rate cut offers some relief. Approximately 590,000 borrowers with base-rate tracker mortgages will see immediate reductions in their monthly payments. However, the majority of mortgage holders on fixed-rate deals will not experience immediate changes. Looking ahead, financial markets anticipate additional rate reductions, potentially bringing the base rate down to 3.5% by the end of 2025. This outlook reflects ongoing concerns about economic growth and the impact of international trade developments.