The Bank of England has cut the Base Rate by 0.25% to 4.25%, marking its second reduction this year. Inflation remains above target at 2.6%, prompting the Bank to act cautiously to support growth while managing economic uncertainty.
Mortgage Rates Update
Mortgage rates have been edging down. The average 2-year fixed rate is now 4.64%, and the 5-year is 4.60%. More reductions could follow as lenders respond to the Base Rate cut.
Expert Insight
Mortgage expert Matt Smith says the cut was widely expected and more reductions could follow in 2025, possibly bringing the Base Rate to 3.75%. He notes that while rates are slowly falling, lenders are cautious, and global events could still influence UK rates.
What It Means for Borrowers
- Tracker/Variable Rates: Monthly payments will drop.
- Fixed Rates: No change until your deal ends.
- New Deals: Lower rates may become available, especially for those remortgaging or moving.
The Mortgage Charter continues to support borrowers, allowing early rate locks and encouraging flexibility.
Affordability
Lower Base Rates may improve affordability as lenders reduce their 'stress test' thresholds linked to SVRs, currently averaging 7.5%.
What’s Next?
Markets expect 2–3 more cuts this year. The next interest rate decision is due on 19 June 2025.
