Interest rates live: Mortgage boost as Bank cuts rate for third time this year

Explaining its decision to cut interest rates today, the BoE says that although inflation has increased this year “as expected”, they fully anticipate that starting to fall again.

The government-set target rate of inflation is 2 per cent – this has recently been achieved in the Eurozone, but the UK’s level is still at 3.6 per cent according to latest data.

A statement on the matter from the BoE explained inflation will keep rising for now, but will then fall back into next year:

“Inflation has fallen back significantly since its peak of over 11% in 2022. Inflation has increased again recently, but by a much smaller amount. It is likely to rise to around 4% in the next few months, partly because of higher food prices. We expect it to start falling back towards our 2% target after that.

“There has been uncertainty from global developments, including because of changes in global trade policies. While recent trade agreements mean there is less uncertainty than earlier in the year, we continue to watch closely what this could mean for UK inflation.

“We need to be confident that inflation will remain low and stable in a lasting way. We will judge how far and how fast we can cut interest rates to achieve this.”

The Bank of England has confirmed a cut to interest rates, down to 4% – the lowest level since March 2023.

While the outcome was expected, analysis will focus more on the split of votes and the BoE’s predictions for economic growth, inflation and the UK jobs market in the coming months.

It marks a third interest rate cut of the year by the Monetary Policy Committee, and a fifth since rates started coming down again in August of last year, from a high point of 5.25%.

Here’s how the next hour or so will pan out:

At noon we’ll get the decision, we’ll get plenty of expert comment and the interest rate change (assuming predictions are right) will take effect.

Then at 12:30 we get a press conference at the BoE where the voting members will explain upcoming economic expectations and more.

No doubt a lot of political reaction and public expectation to follow this afternoon too.

Here’s a more graphic representation of just how high interest rates rose as inflation spiralled under the last government – and how rates are still only slowly coming back down under this one.

For over a decade, borrowing money was super cheap, very nearly free.

Anyone with repayments to make between 2020 and 2023 got a bit of a shock to the system if their deal was tracking the base rate, that’s for sure.

But we are, as the right side of the chart shows, on a steady path downwards in the past year or so. “Gradual and careful,” the BoE calls it.

Plenty say that even this is too fast though, with inflation having been rising once more of late.

The UK has a new cheapest supermarket, if you’ve not already heard – Aldi lost the title for the first time in two years.

You can read more about that here including how loyalty cards impact (or don’t!), and you can vote in our poll below to tell us where you shop too!

Aside from being a negative for savers, most households will generally see an interest rate cut as a positive.

However, the savings it makes them on bills and borrowing may not feed through to spending immediately, says one expert – because of fears about what lies ahead.

That’s particularly prevalent given talk of more taxes in the Budget this autumn.

“Investors are primed for an interest rate cut from the Bank of England later today, given the highly sluggish nature of the economy, and the rising unemployment rate,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“There will be hopes that if loans become cheaper, it will help boost consumer and business confidence but there’s a long way to go. In the meantime, speculation over potential tax rises in the Autumn Budget may keep households and companies cautious, given the uncertainty over where extra burdens may land.

“There will be a lot of focus on the voting split on the Monetary Policy Committee, given that the views are highly unlikely to be unanimous, and the leaning of members could help indicate the speed of future rate cuts.”

If you’re on a tracker mortgage rate (or if you’re soon to negotiate down a deal from a couple of years ago) then an interest rate cut today could be to your benefit, saving a bit of outgoing money.

However, if you still put that into paying off your property (if your terms allow – always check!) then it can save you way more in the long run.

Jinesh Vohra, CEO of mortgage app Sprive, said: “Around one in five (17 per cent) mortgage holders are currently on variable rate mortgages, and if the Bank of England cuts the base rate today, their mortgage rate will drop as a result.

“For example, someone with a £150,000 mortgage at 4.25% over 25 years currently pays around £812 a month.

If the rate is cut by 0.25%, their monthly payment would fall to £791 — a saving of £21 a month, or £252 a year.

“While it might be tempting to enjoy that saving, those who can afford to should consider maintaining their current payment level and using the £21 saving to overpay their mortgage instead. Doing so could save them £4,280 in interest and help clear their mortgage 1 year and 1 month earlier.

“Overpaying is one of the most powerful ways to become mortgage-free faster. Even small, regular overpayments can knock years off the term and save thousands in interest — helping mortgage holders reach financial freedom sooner, without stretching their budget.”

Here’s a quick wrap of the latest companies announcements and financials this morning:

Advertising firm WPP has cut 7,000 jobs and saw profits drop from £338m a year ago to £98m this year as a tough year continues. Shares were down 2.7 per cent this morning and have dropped by more than half this year.

Aside from the questions of inflation and economic growth, there’s one additional big reason why lots of people hope for interest rate cuts, now and in the coming months.

Many thousands of homeowners are set to see their five-year fixed term mortgage deals expire in the second half of 2025 – and given interest rates were 0.1 per cent for most of 2020, it’s fair to say the increased payments they face will be a big shock to the system.

One mortgage broker suggests the fall-out will dampen down house prices and many need to reassess their financial positions.

Ranald Mitchell, from Charwin Mortgages, said: “For many borrowers, 2025 will prove the hangover after the house party. Millions are waking up to find their cheap-as-chips pandemic mortgage deals have vanished, replaced with monthly payments that bite.

“For five-year fixers coming off sub-2% rates, some are facing £300–£500 extra a month. It’s not just a shock, it’s a financial slap. This won’t crash the market, but it will chill it. Potential movers may pause and reflect on their new monthly financials. The days of borrowing big and breezing through affordability checks are over.”

Across most global markets, shares were on the up overnight and today despite those tariffs coming into effect – the UK’s FTSE 100 is very much an outlier there, as AJ Bell’s Danni Hewson explains.

“The FTSE 100 is struggling to make meaningful progress this week, running to stand still as investors weigh the latest economic, geopolitical and corporate developments,” says Ms Hewson.

“Not helping today was several heavyweight names trading without the rights to their dividend. This held the index back despite gains on Wall Street and across Asia. Investors are largely greeting widespread tariffs taking effect with a shrug.

“The exception again was India, with the Trump administration ordering a big increase in tariffs to punish the country for buying and selling Russian oil.”