The Bank of England has reduced the UK base rate from 4% to 3.75%, marking the fourth cut this year and the lowest level seen in nearly two years.

The Bank has indicated that inflationary pressures are easing, with Consumer Prices Index (CPI) inflation falling to 3.2%, and expectations that inflation will move closer to its 2% target during 2026. As a result, further gradual rate reductions may follow.

But what does this latest cut mean in practice for your finances?

Mortgages

How you’re affected depends on the type of mortgage you hold:

• Fixed-rate mortgages
  If you’re on a fixed deal, nothing changes until the end of your fixed term. Many lenders had already priced this cut into their products, so while rates may edge down slightly, large drops are unlikely in the short term.
  If your fixed rate ends in the next 3–6 months, it may be worth reviewing your options now, as many lenders allow you to secure a rate in advance and switch later if better deals appear.
• Tracker mortgages
  Tracker rates usually move in line with the base rate, so you should see your rate fall by 0.25%, reducing repayments by around £15 per month for every £100,000 borrowed.
• Variable or standard variable rate (SVR) mortgages
  Lenders are not obliged to pass on the full cut, but most reduce rates by a similar amount. Any change typically takes effect within a few weeks.

Savings

• Easy-access and variable savings accounts
  These rates are likely to fall by up to 0.25% over the next few weeks. If you’re holding cash in easy-access accounts, it’s worth checking whether your rate remains competitive.
• Fixed-rate savings
  Fixed savings rates already reflect expectations of lower rates, but may still edge down. If you’re considering fixing and are comfortable locking money away, securing a rate sooner rather than later may provide peace of mind.

Credit cards

Credit card interest rates are typically far higher than the base rate, so most cards will be unaffected. However, lower-rate expectations can encourage lenders to extend 0% balance transfer offers, which may be helpful if you’re carrying existing card debt.

Loans

• Existing personal loans are usually fixed, so repayments won’t change.
• New loans are priced based on longer-term interest rate expectations rather than single base rate moves. Any reductions in new loan rates are likely to be modest and gradual.

Why the base rate was cut

The Bank of England uses interest rates as a tool to control inflation. Higher rates discourage spending and borrowing, helping to slow price rises.

At its latest meeting, the Monetary Policy Committee voted 5–4 in favour of the cut, noting that inflation risks have eased and that interest rates are likely to follow a gradual downward path over time.

What should you do next?

This rate cut may create opportunities, but the right action depends on your personal circumstances, goals and timeframes. Whether you’re reviewing your mortgage, reassessing your savings strategy or planning ahead for future borrowing, professional advice can help ensure your decisions remain aligned with your wider financial plan.

If you’d like to discuss how these changes affect you, your BroadBench adviser will be happy to help.

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