Mortgage holders may have been disappointed that the Bank of England held interest rates at 4.25% on 19 June when its Monetary Policy Committee last met.
But there may be some good news on the horizon as many experts predict the bank will cut interest rates when the MPC next meets in August.
Meanwhile, the Bank of England‘s Governor Andrew Bailey said it is ready to make larger interest rates cuts if the jobs market shows signs of a pronounced slowdown. He said the economy was growing behind its potential, opening up ‘slack’ that would help bring down inflation.
‘I really do believe the path is downward’ for interest rates, he told The Times. Adding, ‘If we saw the slack opening up much more quickly, that would lead us to a different conclusion.’
At the 19 June meeting, the Bank held interest rates but the vote was split, with six members voting to maintain the bank rate at 4.25% while three members voted to cut interest rates to 4%.
This vote was more in favour of cutting interest rates than expected which some experts say may be due to signs that the labour market it cooling. While unemployment increased to 4.6% between February and April, the highest level in almost four years.
However, with so much global instability, not least in the Middle East, the outlook for interest rates is far from certain.
Will the Bank of England cut interest rates on 7 August?
Yes, the Bank of England is widely predicted to cut interest rates from 4.25% to 4% when its Monetary Policy Committee next meets on 7 August.
But predictions do vary and could change dramatically depending on what happens in the UK economy and globally before the meeting.
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Interest rates predictions
- Most analysts expect two further interest rates cuts in 2025, one in August and one in November, to bring the base rate down to 3.75%.
- Markets are currently pricing in an 82% chance of an interest rates cut in August although that has reduced slightly following the escalating tension in the Middle East. By comparison, in May, markets were pricing in three cuts
- Capital Economics also forecasts two more cuts by the end of this year, in August and November taking the base rate to 3.75%. And one more cut in early 2026, taking it to 3.50%. In fact, it says there’s a growing chance that rates fall to 3.00% next year.
- ING expects quarterly cuts, which would mean two more interest rates cuts this year. Its economists predict these cuts will come in August and November.
- While Deutsche Bank expects three more cuts in August, November and December, taking the base rate to 3.5% by the end of 2025.
- And Morgan Stanley predicts that UK interest rates will reach 3.25% by the end of the year, settling at 2.75% in the first half of 2026.
- Predictions of what will happen to interest rates in the longer term also vary. For example, Santander predicts interest rates will stay between 3-4% for the foreseeable future while economists at Oxford Economics have forecast the base rate will eventually fall to 2.5% in 2027.
Latest Bank of England base rate news
The Bank of England held interest rates in June at 4.25%. This decision was widely expected.
The Bank cut interest rates in May 2025 taking the base rate from 4.5% to 4.25%. This followed interest rates cuts in February 2025, November 2024 and August 2024, when the base rate was first cut from 5.25%.
What are interest rates and why do they change?
- The Bank of England’s base rate acts as a benchmark for the cost of borrowing money. As a general rule, when interest rates increase, so does the cost of borrowing on mortgages and other types of borrowing.
- One major reason why the Bank moves rates up and down is to help control inflation. When inflation is high, the bank may increase interest rates to try to bring it down by encouraging people to spend less and reduce demand. And once inflation is at or near its target, the Bank may hold or cut interest rates.
- However, the Bank’s Monetary Policy Committee will assess a range of factors when deciding whether to cut interest rates including job and wages data and external factors that can impact the economy.
What’s happening with inflation?
Official figures released in July 2025 showed that the UK inflation rate had unexpectedly increased to 3.6% in the 12 months to June, up from 3.4% the previous month. This is 1.6 percentage points higher than the Bank’s inflation target of 2%.
When is the Bank of England’s Monetary Policy Committee’s next meeting?
The next Bank of England’s Monetary Policy Committee meeting is on 7 August 2025. Its subsequent meetings are on 18 September 2025, 6 November 2025 and 18 December 2025. The Bank of England publishes a calendar of future committee meeting dates here.
How do interest rates affect mortgages, loans and savings rates
How changes in interest rates affect your mortgage
Falling interest rates usually means mortgage rates fall too. Stay up to date with our guide to Mortgage rate predictions.
However, how changes in interest rates affect your mortgage depend on your circumstances:
- You’re taking out a new mortgage: If you’re shopping around for a new mortgage or want to remortgage, the mortgage rates available should improve if interest rates fall, although this isn’t guaranteed.
- If you’re on a fixed rate mortgage the amount you’ll pay on your monthly mortgage payments will stay the same during your initial term – usually 2 or 5 years. So your mortgage payments won’t change if interest rates go up or down.
- You have a tracker mortgages If you’re one of the estimated 600,000 households on a tracker mortgage deal and interest rates are cut, your mortgage payments will fall as the rate you pay on your mortgage rises and falls in line with the Bank of England base rate.
- If you’re on a discounted variable rate you’ll pay a rate that’s lower than the lender’s Standard Variable Rate. If your lender decides to pass on the cut in interest rates, your mortgage payments will fall. But it won’t necessarily pass on all or any of the cut.
- You’re on your lender’s Standard variable rate (SVR) According to UK Finance, there are around 1.1 million households on their lender’s standard variable rate. If this includes you, if your lender decides to reduce its SVR if interest rates fall, the amount you’ll pay will fall. But the lender may not pass on all or any of an interest rate cut. Lenders’ SVRs can be extremely expensive, so check your deal now to see if you can save by remortgaging.
Interest rate changes impact on credit cards and loans
Other types of borrowing are affected in a similar way. If interest rates go up, borrowing of any type generally gets more expensive, while when interest rates are cut, borrowing generally gets cheaper. However, this is in general terms as the amount you’ll pay on things like credit cards and loans will depends on a number of factors including your credit history.
July 24, 2025 
