Bank of England cuts base rate to 4.25% – what buyers and homeowners need to know
TheHub@Druce- •
- 19 May 2025
Bank of England cuts base rate to 4.25% – what buyers and homeowners need to know
The Bank of England has reduced the base interest rate from 4.5% to 4.25% (as of 8 May 2025). This is the first rate cut in over a year and reflects falling inflation, slower wage growth, and global trade stabilisation.
How does this affect your mortgage?
Whether you’re on a tracker mortgage, planning to buy, or looking to remortgage, this shift matters.
Example calculation – mortgage on a £600,000 home
| Scenario | Before (4.5%) | After (4.25%) | |
|---|---|---|---|
| Loan amount (80% LTV) | £480,000 | £480,000 | |
| Monthly interest-only payment | £1,800 | £1,700 | |
| Monthly repayment (25 yrs term) | £2,667 | £2,552 | |
That’s a £115/month saving on repayments with the new rate.
What it mean if you already own a home
If you're currently on a tracker or variable mortgage, the rate cut to 4.25% is likely to result in an immediate reduction in your monthly payments. This could ease pressure on household budgets and create an opportunity to overpay your loan while rates are lower. For those on a fixed-rate mortgage, the impact won’t be felt right away, but this change signals that the high-rate cycle may be peaking. If your deal is due for renewal within the next 12 months, it’s worth speaking to a mortgage broker now to review future options and potentially secure a more favourable rate before further market shifts.
Landlords and property investors should consider whether this is the time to restructure their lending. With rents at historic heights in many areas, especially in Prime Central London, a small reduction in borrowing costs can significantly improve net rental yield. Portfolio landlords may also find this an opportunity to refinance and release equity for new purchases or upgrades. If you’re fully let, consider using the savings to invest in energy efficiency improvements or furnishing, both of which can command higher rental income and longer tenancies.
Thinking of buying in 2025?
For prospective buyers, this interest rate cut could make a meaningful difference in affordability. Lower borrowing costs translate to better monthly payment terms, improving mortgage approval odds and expanding the range of properties within reach. While this might not be a return to ultra-low rates, it’s a signal that conditions are softening, creating a window of opportunity for those ready to act.
For buy-to-let investors, the timing is particularly favourable. With tenant demand still outpacing supply in many boroughs, and rental values holding strong, a modest cut in interest rates can deliver a more attractive yield, especially in areas like Kensington, Notting Hill, and Fulham. Investors should also factor in that lenders are likely to adjust their stress test thresholds, potentially easing the path to financing compared to 2024.
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