The Bank of England is poised to reduce its base interest rate by 0.25 percentage points to 4.25% on Thursday, May 8, 2025. This anticipated move aims to alleviate financial pressures on borrowers amid global economic uncertainties, including recent U.S. trade tariffs.
Relief for Homeowners
A rate cut would offer significant relief to homeowners, particularly those with variable-rate mortgages or those nearing the end of fixed-rate deals. According to NerdWallet UK, borrowers could save over £1,000 annually on average, depending on loan size and terms. With over 1.8 million fixed-rate mortgages set to expire this year, many homeowners stand to benefit from lower remortgaging costs.
Major lenders including Barclays, HSBC, NatWest, Halifax, Nationwide, and Santander have already begun reducing mortgage rates in anticipation of the Bank’s decision. Many fixed-rate deals are now available below 4%, providing an opportunity for borrowers to secure more affordable financing.
Economic Context
The expected rate cut would be the fourth since August 2024, reflecting the Bank’s ongoing response to slowing economic growth and easing inflation. The UK’s inflation rate has recently dipped to 2.6%, moving closer to the Bank’s 2% target. However, global trade tensions, particularly driven by new U.S. tariffs, have negatively impacted growth expectations.
The International Monetary Fund (IMF) now forecasts UK economic growth at 1.1% for 2025, a drop from the earlier 1.6% projection.
Impact on Savers
While lower interest rates bring relief for borrowers, savers may see reduced returns on their deposits. Experts suggest locking in current rates, as easy-access and fixed-rate accounts are likely to decrease in value after the rate cut. Some providers are still offering one-year fixed-term accounts with rates up to 4.65%, though these may not last long.
What Should You Do?
- Homeowners: If you’re on a variable-rate mortgage or your fixed-rate deal is expiring, now is a good time to explore remortgage options to benefit from falling rates.
- Savers: Review your savings strategy. Consider locking in fixed-term rates now before potential declines.
- Investors: Lower interest rates affect broader markets. Speak to a financial advisor to rebalance or reevaluate your portfolio if necessary.
Stay Informed
For official updates on the UK’s interest rate and economic forecasts, visit the Bank of England’s website:
Bank of England – Current Interest Rate
Understanding how monetary policy shifts impact your financial situation is essential—whether you’re a homeowner, saver, or investor. Stay alert, informed, and seek professional advice if you’re unsure how to proceed.