{"id":10775,"date":"2025-05-08T12:08:15","date_gmt":"2025-05-08T12:08:15","guid":{"rendered":"https:\/\/www.mouthymoney.co.uk\/?p=10775"},"modified":"2025-05-08T12:08:26","modified_gmt":"2025-05-08T12:08:26","slug":"bank-of-england-cuts-the-base-rate","status":"publish","type":"post","link":"https:\/\/www.mouthymoney.co.uk\/investing\/bank-of-england-cuts-the-base-rate\/","title":{"rendered":"Bank of England cuts the base rate"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><strong>The Bank of England has cut the base rate, bringing potential for more relief for hard-pressed households.<\/strong><\/h3>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"800\" height=\"544\" src=\"data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==\" data-src=\"https:\/\/www.mouthymoney.co.uk\/wp-content\/uploads\/2025\/05\/53648018107_58d56c80cf_c.jpg\" alt=\"\" class=\"wp-image-10776 lazyload\" data-sizes=\"auto\" data-srcset=\"https:\/\/www.mouthymoney.co.uk\/wp-content\/uploads\/2025\/05\/53648018107_58d56c80cf_c.jpg 800w, https:\/\/www.mouthymoney.co.uk\/wp-content\/uploads\/2025\/05\/53648018107_58d56c80cf_c-300x204.jpg 300w, https:\/\/www.mouthymoney.co.uk\/wp-content\/uploads\/2025\/05\/53648018107_58d56c80cf_c-450x306.jpg 450w, https:\/\/www.mouthymoney.co.uk\/wp-content\/uploads\/2025\/05\/53648018107_58d56c80cf_c-225x153.jpg 225w, https:\/\/www.mouthymoney.co.uk\/wp-content\/uploads\/2025\/05\/53648018107_58d56c80cf_c-20x15.jpg 20w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/figure>\n\n\n\n<p><br>The Bank of England (BoE) has cut its headline base rate from 4.5% to 4.25%.<\/p>\n\n\n\n<p>The Monetary Policy Committee (MPC) voted five to four in favour of a 0.25% rate cut.<\/p>\n\n\n\n<p>Two members voted to hold the bank rate at its current level, while the final two opted for a bigger 0.5% cut in the base rate.&nbsp;<\/p>\n\n\n\n<p>The MPC underlined what it sees as significant economy issues ahead for the UK economy as the reason for its cut.<\/p>\n\n\n\n<p>However, in its latest forecast it sees inflation rising to 3.7% by the end of this year. Despite this the MPC has pressed on with cuts as it sees the increase in price rises as a temporary phenomenon.&nbsp;<\/p>\n\n\n\n<p>Dean Butler, managing director for retail direct at Standard Life, part of Phoenix Group, comments: \u201cThis is the second significant move by the MPC in 2025 and maybe not the last following lower than expected March inflation and sluggish economic growth.&nbsp;<\/p>\n\n\n\n<p>\u201cUncertainties remain around any inflationary impact of April\u2019s employer National Insurance increase, market uncertainty following the US tariffs and wider geopolitical issues however some forecasters predict a series of rate cuts in the year ahead.\u201d<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>How it affects households<\/strong><\/h3>\n\n\n\n<p>The BoE base rate underpins the cost of debt in the economy and the rewards that savers get for stowing their cash.<\/p>\n\n\n\n<p>Butler adds: \u201cFor borrowers, particularly those on variable rate mortgages or approaching the end of a fixed term, today\u2019s rate cut will come as welcome news. Lower interest rates mean reduced monthly repayments, easing financial pressure for many households.&nbsp;<\/p>\n\n\n\n<p>\u201cHowever, with ongoing cost of living challenges still front of mind for many, particularly in the context of April\u2019s bill rises, any savings will likely go towards covering immediate expenses rather than discretionary spending. Those with unsecured borrowing like credit card balances may also benefit, though lenders often pass on cuts more slowly in these areas.\u201d<\/p>\n\n\n\n<p>Mortgage rates take some of their cues from the base rate, but it is not necessarily a clear-cut relationship. Much of the market is already priced in ahead of base rate moves thanks to swap rate market and how lenders plan their business.&nbsp;<\/p>\n\n\n\n<p>\u201cFor savers, however, there\u2019s a more complex picture,\u201d Butler continues. \u201cCash savers may find returns begin to erode in real terms, particularly if inflation remains above the Bank\u2019s 2% target.&nbsp;<\/p>\n\n\n\n<p>While it\u2019s important to maintain a level of accessible, cash-based savings for emergencies, those with longer-term goals might consider investing to help make their money work harder.\u201d<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><a href=\"https:\/\/www.mouthymoney.co.uk\/pensions\/the-mouthy-money-podcast\/\">LISTEN: Mouthy Money podcast on why the Bank is cutting its base rate<\/a><\/p>\n<\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Unclear outlook<\/strong><\/h3>\n\n\n\n<p>The Bank\u2019s rate cut comes against a backdrop of rising economic and geopolitical uncertainty. This is thanks chiefly to US President Donald Trump\u2019s \u2018tariff war\u2019 and the consequent chaos this caused in investment markets.<\/p>\n\n\n\n<p>However, the UK Government is today due to announce a free trade deal with the US -the world\u2019s largest economy. In recent days it already published details of a deal with India, the world\u2019s fourth largest economy.&nbsp;<\/p>\n\n\n\n<p>Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown explains: \u201cGiven that the UK economy is decelerating into a dark tunnel of uncertainty, it comes as little surprise that policymakers have opted for an interest rate cut. Decision makers round the table want to avoid [economic] activity grinding to a complete halt.&nbsp;<\/p>\n\n\n\n<p>\u201cBy cutting borrowing costs, they\u2019re hoping to relieve pressure on businesses, stimulate demand in the economy and shine a light towards a recovery. Inflation may still be above target, but deflationary forces are at work, which could have worrisome consequences for growth and are likely to act as a dampener on price rises.\u201d<\/p>\n\n\n\n<p>This explains the BoE\u2019s more aggressive approach, although it has stood back from slashing the rate by a higher amount for now.<\/p>\n\n\n\n<p>Streeter continues: \u201cA recession rather than stubborn inflation is the ogre to avoid right now. The niggling worry of high pay demands looks set to be fading into the background given that hirings have been scaled back by many firms. There is also the chance that an influx of cheaper Chinese-made goods could infiltrate the retail scene and land in virtual baskets.&nbsp;<\/p>\n\n\n\n<p>\u201cCut price giants Shein and Temu have increased ad spending in the UK and other parts of Europe, as the US looks like a much more hostile environment. With worries about inflation evaporating and fears about growth rising, it looks like this rate cut could be followed by at least two \u2013 and potentially three &#8211; more this year.\u201d<\/p>\n\n\n\n<p><a href=\"https:\/\/www.flickr.com\/photos\/bankofengland\/53648018107\/\" target=\"_blank\" rel=\"noreferrer noopener\">Image courtesy of the Bank of England<\/a><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Bank of England has cut the base rate, bringing potential for more relief for hard-pressed households. The Bank of England (BoE) has cut its headline base rate from 4.5% to 4.25%. The Monetary Policy Committee (MPC) voted five to four in favour of a 0.25% rate cut. Two members voted to hold the bank&hellip;<\/p>\n","protected":false},"author":66,"featured_media":10776,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[1341,4,3],"tags":[1278,139,64],"class_list":["post-10775","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budgeting","category-investing","category-mortgages","tag-base-rate","tag-mortgages","tag-savings"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.3.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Bank of England cuts the base rate - Mouthy Money<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.mouthymoney.co.uk\/investing\/bank-of-england-cuts-the-base-rate\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bank of England cuts the base rate - Mouthy Money\" \/>\n<meta property=\"og:description\" content=\"The Bank of England has cut the base rate, bringing potential for more relief for hard-pressed households. The Bank of England (BoE) has cut its headline base rate from 4.5% to 4.25%. The Monetary Policy Committee (MPC) voted five to four in favour of a 0.25% rate cut. 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