Bank of England Base Rate Announcement: Februrary 2025

In their first meeting of the year, the Bank of England has just announced a further reduction in interest rates. You might have some questions about what the news means for you – let's take a look.  

What happened with interest rates today?   

The Bank of England voted today that interest rates will decrease from 4.75% to 4.5%. From 2023 to 2024, the rate held at 5.25% for many months, so another drop is big news. 

Why did the rate decrease?   

Every 6(ish) weeks the Bank of England reviews the base rate at their MPC (monetary policy committee) meeting. It moves up and down (or stays the same) to help control inflation in the UK.   

Rates tend to rise as inflation goes up. A lower rate encourages people to spend their cash to help the economy grow. So, a drop in rates suggests inflation has continued to fall – or is at least under control.  

What does it mean for the housing market?   

Today’s lowering of the rate is encouraging for new buyers, as mortgages will likely become slightly more affordable. This could bring up demand for houses, and maybe prices. But there are a lot of other factors, so we’ll have to see. 

What does the change mean for my mortgage?   

A drop in rates is good news for first-time buyers looking for a mortgage. If you already have a mortgage, and your rate is locked in (often called a ‘fixed’ mortgage), there won’t be any immediate change. Your rate will stay the same until your fixed term ends – whatever the interest rate does.  

If you’re on a tracker mortgage or a standard variable rate (SVR), you could see an immediate change, as the monthly cost tends to move in line with the base rate. They usually have a minimum rate though, often set at the amount you were paying at the start of the deal.   

Rate expiring soon? It’s good to talk to a lender or a broker — because the standard variable may be a lot more than what you're on now. 

What happens next time?    

There are a few predictions out there. Some suggestions say interest rates will lower to around 3.75% by the end of 2025, some think it’ll take longer to drop – but we can’t really know for sure. We’ll have to wait and see.  

In the meantime, feel free to reach out – we’re here if you need us.