Bank of England cuts interest rates to 4.25% - what it means for your money

When the base rate changes, it has an impact on your borrowing and saving, as banks and lenders will update their interest rates to reflect the Bank of England decision

The Bank of England has cut its base rate from 4.5% to 4.25% - but what exactly does this mean for you? The base rate is the interest rate that the Bank of England charges other banks and lenders when they borrow money.

When the base rate changes, it has an impact on your borrowing and saving, as banks and lenders will update their interest rates to reflect the Bank of England decision.

Interest rates have been steadily coming down from their peak of 5.25%. The base rate reached this level in August 2023 and remained this high until August 2024, when the Bank of England finally cut it to 5%.

The Bank of England has announced a further two cuts since then, to take the base rate to its current level of 4.5%. The most recent cut was announced during its February 2025 meeting. The base rate was held at 4.5% at the last meeting in March 2025.

Most economists had predicted the base rate would be cut to 4.25% although some had factored in a bigger drop to 4%. The Bank of England uses its base rate to keep inflation - which is a measure of price rises - under control.

Inflation fell to 2.6% in March, down from 2.8% in February, but this is still higher than the 2% target the Bank of England is aiming for.

I have a mortgage - how does it affect me?

It all depends on the type of mortgage you have. If you have a tracker mortgage, your monthly repayments will go down as this type of deal moves in line with the base rate.

The typical household with a tracker mortgage will see their monthly repayment reduced by around £29. If you have a standard variable rate (SVR) mortgage, then you will need to wait and see if your lender decides to pass on the cut by reducing your mortgage rate.

There are around 1.3 million households on a tracker or SVR mortgage. If you have a fixed rate mortgage, your payments won't change today as you've already agreed to pay a fixed amount each month for a set period of time.

But many people are finding they are paying much more when they come to remortgage from a cheaper deal. If you don't fix into a new deal, you'll usually be moved to the SVR of your existing lender once your current mortgage deal ends.

An estimated 1.8 million fixed rate mortgages are set to expire in 2025.

I have a credit card and loan - how does it affect me?

If your credit card is linked to the base rate, then how much you pay back in interest can change when it is updated. The average credit card purchase APR is around 35%.

Interest rates on personal loans and car financing are normally fixed, so these should not change as you have already agreed set repayments.

If you are planning on taking out a new credit card or loan, you will likely find the rates on offer are still higher than they were previously.

I have savings - how does it affect me?

We have seen saving rates come down, following the previous Bank of England cuts - but there are still plenty of deals out there that beat the rate of inflation.

Cash ISAs currently pay more than easy-access accounts and the best rate is 5.07% from Trading 212. You can pay up to £20,000 into an ISA each tax year and any interest you make is free from tax.

The top easy-access rate today is from Sidekick and Chip and these are both paying 4.76%. The best notice account is from OakNorth Bank and this pays 4.81% with a 95-day notice period.

If you can afford to lock their cash away, a one-year fixed rate of 4.55% is available from several lenders including Tandem Bank, Cynergy Bank and GB Bank.

Regular savings accounts offer the best rates, but you're normally only allowed to make small deposits each month and some accounts restrict how many withdrawals you can make.

Principality Building Society pays 7.5% fixed for six months but you can only deposit up to £200 each month.