Mortgate rates to drop after Bank of England cuts base rate to lowest level for two years

Andrew Bailey, governor of the Bank of England, said: “Inflationary pressures have continued to ease so we’ve been able to cut rates again today.”

Five members of the Bank’s nine-strong Monetary Policy Committee voted for the 0.25 percentage point cut.

UK Finance said homeowners on tracker deals will typically see their monthly repayments reduce by £28.97, based on balances outstanding.

This could add up to a saving of nearly £350 over the course of a year.

People on a standard variable rate mortgage could see their monthly payments fall by £13.87, assuming that their lender passes on the base rate cut in full, which could add up to a saving of nearly £170 over a year.

The Bank also predicted the UK economy will grow by 1% this year, upgrading its previous 0.75% forecast on the back of a strong start to 2025.

However, on Thursday it cut its UK growth forecast to 1.25% for 2026, from 1.5% in its February projections.

It said recently announced US tariff plans and their impact on global trade will dent UK growth by 0.3 percentage points over the next three years.

Most of this impact is set to come from “lower US demand for UK exports” and weaker global activity, according to the Bank’s latest report.

It added that increased “uncertainty” over the trade policy is also likely to contribute to the downward impact on UK growth.

The forecasts were based on tariff policy from the end of April, factoring in a 10% US tariff rate on most UK exports to the country, as well as a 25% tariff on cars and steel.

However, the predictions come hours ahead of an announcement from President Donald Trump which is widely expected to unveil a trade deal between the UK and US.

Meanwhile, UK inflation is predicted to witness a shallower rise than previously expected.

Chancellor Rachel Reeves welcomed the interest rate cut but acknowledged families are still facing a cost-of-living squeeze.

She said: “This interest rate cut is welcome news, and the fourth since we came into government making it cheaper for businesses to borrow, reducing the cost of a new mortgage, making homeownership more accessible, car finance more affordable and easing the pressure on those paying off personal loans.

“But there is more to do, and I know families are still facing cost-of-living pressures.

“In a changing world we’re bringing stability to the public finances and going further and faster to grow the economy, putting more money in the pockets of working people through our plan for change.”