What is the Bank of England base rate?
The base rate determines how much the Bank of England (BoE) pays commercial banks for holding money with it. This then influences how much those banks charge customers to borrow money or pay customers who deposit savings with them. If the base rate goes down, it usually triggers a drop in the interest rate that banks and other lenders charge the public to take out loans, mortgages and credit cards, as well as the interest rate they pay out on savings.
Why has the Bank of England cut the base rate?
Changing the base rate is the Bank of England's way of controlling inflation and influencing UK economic growth.
The Bank of England's decision to cut the base rate marks its fifth cut, continuing the cycle of rate cuts it initiated in August 2024. However, the cut that sees the base rate fall from 4.25% to 4.00% comes against a backdrop of relatively high inflation, which stood at 3.6% for the year to June. The rate of rising costs of services and goods remains lower than its most recent high of 4% for the year to January 2024 but is still a long way from The Bank's target rate of 2%. In addition to this, unemployment figures are rising, and the economy has struggled to grow, explaining why some MPC members were more cautious in their voting. Having voted with MPC members to cut the base rate, the Governor of the Bank of England, Andrew Bailey, commented, "any future rate cuts will need to be made gradually and carefully,".
The base rate reduction will provide households with some reprieve by lowering the cost of borrowing but will also have the effect of lower returns on savings as interest rates on these will likely be lowered. Continuing uncertainty around trade tariffs lingers and although there may be upsides for the UK after recent developments in tariffs imposed by the US on China and India, these are not yet clear.
Comments shared from the committee's review meeting stated that "Underlying UK GDP growth has remained subdued, consistent with a continued, gradual loosening in the labour market. A margin of slack is judged to have emerged in the economy. Downside domestic and geopolitical risks around economic activity remain, although trade policy uncertainty has diminished somewhat."
The US Federal Reserve chose to maintain the current benchmark interest rate at a range of 4.25% - 4.50%, continuing the "wait and see" approach it has adopted despite pressure from the Trump administration to lower borrowing costs. The European Central Bank (ECB) chose to do the same and decided on July 23rd to keep all ECB rates the same meaning the deposit facility rate was held at 2.00%.
How has the BoE base rate changed over time?
The graph below shows how the Bank of England base rate has dramatically dipped and soared over time, either side of long periods of stability.
(Source: Bank of England)
Base Rate changes and how they impact you: December 2021 - August 2025
The table below shows the impact of the base rate decisions by the Bank of England since December 2021 on a £100,000 mortgage borrowed over 25 years:
| Date | Interest rate change | Previous interest rate | New interest rate | Change to average monthly mortgage repayments per £100k borrowed* |
| 16th December 2021 | +0.15% | 0.10% | 0.25% | +£8 |
| 2nd February 2022 | +0.25% | 0.25% | 0.50% | +£13 |
| 17th March 2022 | +0.25% | 0.50% | 0.75% | +£13 |
| 5th May 2022 | +0.25% | 0.75% | 1.00% | +£13 |
| 16th June 2022 | +0.25% | 1.00% | 1.25% | +£13 |
| 4th August 2022 | +0.50% | 1.25% | 1.75% | +£26 |
| 22nd September 2022 | +0.50% | 1.75% | 2.25% | +£26 |
| 2nd November 2022 | +0.75% | 2.25% | 3.00% | +£39 |
| 15th December 2022 | +0.50% | 3.00% | 3.50% | +£26 |
| 2nd February 2023 | +0.50% | 3.50% | 4.00% | +£26 |
| 23rd March 2023 | +0.25% | 4.00% | 4.25% | +£13 |
| 11th May 2023 | +0.25% | 4.25% | 4.50% | +£13 |
| 22nd June 2023 | +0.50% | 4.50% | 5.00% | +£26 |
| 3rd August 2023 | +0.25% | 5.00% | 5.25% | +£13 |
| 21st September 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 2nd November 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 13th December 2023 | +0.00% | 5.25% | 5.25% | £0 |
| 1st February 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 21st March 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 9th May 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 20th June 2024 | +0.00% | 5.25% | 5.25% | £0 |
| 1st August 2024 | -0.25% | 5.25% | 5.00% | -£13 |
| 19th September 2024 | +0.00% | 5.00% | 5.00% | £0 |
| 7th November 2024 | -0.25% | 5.00% | 4.75% | -£13 |
| 19th December 2024 | +0.00% | 4.75% | 4.75% | £0 |
| 6th February 2025 | -0.25% | 4.75% | 4.50% | -£13 |
| 20th March 2025 | +0.00% | 4.50% | 4.50% | £0 |
| 8th May 2025 | -0.25% | 4.50% | 4.25% | -£13 |
| 19th June 2025 | +0.00% | 4.25% | 4.25% | £0 |
| 7th August 2025 | -0.25% | 4.25% | 4.00% | -£13 |
| TOTAL | £203 |
*assumed mortgage term is 25 years
How does the Bank of England interest rate decision affect mortgages?
Fixed-rate mortgage customers
Anyone with a fixed-rate mortgage will not see a change to their mortgage rate or their monthly repayments in spite of the cut to the base rate. If your deal is due to end soon, you should still consider how mortgage rates might change in the coming months. Our article 'Will interest rates continue to fall in 2025 & how low will they go?' provides some insight into remortgaging and what to do if you are due to remortgage soon. If your mortgage deal is due to end in less than 6 months you can start to shop around and it is beneficial to speak to a mortgage adviser. Mortgage interest rates are continuing to fall, albeit slowly but lenders reprice deals frequently so securing a good deal when it comes up could provide significant savings on your new monthly mortgage payment and the overall cost of your mortgage.
It is worth remembering that if your current fixed-rate deal was in place prior to December 2021 (before rates first started going up), then you should factor in all of the subsequent base rate rises and cuts in order to budget for the likely increase in your monthly mortgage repayments after you remortgage. As shown in the table above, this equates to a monthly increase of around £203 per £100,000 borrowed, based on a 25-year mortgage term.
Many borrowers choose to extend their mortgage term, when arranging new mortgages or remortgaging existing deals, in order to make monthly repayments more affordable. This may help in the short-term for those struggling with higher mortgage interest rates but it will mean that the debt is carried further into the future and will end up costing them more in interest payments over the long-term. Extending your mortgage term should be considered carefully with the help of an independent mortgage expert*.
Variable rate or tracker mortgage customers
Those with tracker or variable-rate mortgages tend to see their mortgage rates (and monthly repayments) change in line with the moves in the base rate. This means that your mortgage rate and repayment amount is likely to be adjusted if it tracks the BoE base rate. If you wish to see what a rate cut by the Bank of England would do to your monthly mortgage payment, you can use our interest rate calculator. You will need to know your initial mortgage term, the amount you borrowed at the start of the deal and your current mortgage rate.
Anyone wanting to know more about how rate rises and cuts impact their finances should speak with an independent mortgage adviser* as they can provide specialist advice. When considering remortgaging, always check to see if there are any Early Repayment Charges (ERC) and check to see how long is left on your current mortgage deal. Take a look at the best mortgage deals by using our mortgage rate comparison tool or checking out our article 'Best mortgage rates in the UK'.
Help if you're unable to afford your mortgage payments
Many mortgage holders continue to be faced with increasing mortgage costs due to the rise in mortgage interest rates since 2021. If you are worried about how you will afford your mortgage, then you should get in touch with your lender as soon as possible. Your lender should be able to find a solution that can help ensure no repayments are missed.
Potential solutions can include extending the length of your mortgage, converting part or all of your repayment mortgage to an interest-only mortgage or allowing you to take a mortgage payment holiday.
Check out our article 7 tips for dealing with mortgage arrears, or alternatively, you may find additional support from the following organisations helpful:
How does the Bank of England base rate decision affect you if you have credit cards, loans or overdrafts?
Credit cards
If you have an existing credit card with an agreed interest-free period or promotional interest rate you shouldn't notice any impact from the Bank of England base rate announcement.
Keep in mind that 0% credit cards are the best way to avoid any base rate fluctuations, by not paying interest at all. For example, by moving your existing credit card balance to a 0% balance transfer credit card, you ensure you pay no interest on your repayments if the balance is repaid within the promotional interest-free period. Be aware that most (not all) balance transfer credit cards charge a balance transfer fee, usually somewhere between 2% and 5%. Find out more in our article, 'Best 0% balance transfer credit cards'.
Loans
If you already have a loan with a fixed interest rate then you are unlikely to be affected whether the base rate is changed or not. If you are looking for a new loan then you can compare the best loan deals in our article, 'Best personal loans'.
Overdrafts
The interest rate charged on your overdraft may be affected as a result of the base rate decision. If your bank or building society is going to change the rate of interest charged, you should receive a notification in advance, but it can take time for the change to be communicated.
How does the Bank of England base rate decision affect you if you have savings?
Although interest rates on savings accounts can remain unaffected when the base rate is cut, some lenders may reduce interest on savings products and existing savings promotions may be pulled from the market. You may see some changes to the interest rate paid on your savings, unless you have a fixed-rate bond, for example, over the coming weeks and months.
This also means that it is possible that we may have already hit the peak of high interest rates on savings accounts, so now might be a good time to secure the best rate on your savings. Our article, 'How to get more than 5% interest on your savings' summarises some of the best rates on the market and our regularly updated article 'Best savings accounts in the UK' provides a summary of the best savings rates for personal and business accounts.
Looking for the top savings rates should always involve shopping around for the right deal. You can check out the highest savings rates using our Savings Best Buy tables. Right now you can get as much as 7.5% interest on a Regular Saver account.
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