The Bank of England (BoE) has announced a 0.25% cut to its base rate to bring interest rates down to 4%.

The latest move is the fifth cut to the base rate since the BoE started to bring interest rates down in August last year, from a peak of 5.25%.

At its meeting this week, the nine members on the BoE’s Monetary Policy Committee (MPC) voted by a majority of five to four for a 0.25% reduction. Four members were in favour of holding rates at 4.25%.

The central bank’s decision to announce another rate cut follows the 12-month rate of CPI inflation, as reported by the Office for National Statistics (ONS), increasing to 3.5% in Q2 2025.

According to the report published by the BoE today, the MPC is expecting inflation to edge up slightly further to peak at 4.0% in September, before starting to fall back again towards its 2% target in the months after.

“The Committee remains alert to the risk that this temporary increase in inflation could put additional upward pressure on the wage and price-setting process,” the BoE report said. “Overall, the MPC judges that the upside risks around medium-term inflationary pressures have moved slightly higher since May.”

Reacting to the rate reduction, executive director at Zoopla, Richard Donnell, said that while the cut would be “welcome news for businesses and consumers”, it is “unlikely to make a major difference” to the cost of mortgages for home buyers or deliver a boost to house prices.

“The price of fixed rate mortgages already factors in the future path of base rates meaning average mortgage rates are likely to remain broadly where they are today,” Donnell said.

“However, changes to the way banks assess mortgage affordability over recent months have already delivered a 20% boost to what people can borrow with no change in average mortgage rates. This has been supporting unseasonably strong levels of housing market activity, with the most homes for sale in over seven years. This cut to the base rate will support more positive housing market sentiment amongst home buyers.”

CEO of Just Mortgages and Spicerhaart, John Phillips, added: “There’s no doubt that many lenders will have already factored this into their pricing, but it remains a powerful piece of good news for brokers to be sharing with potential clients. Lenders have been staying competitive, all while continuing to innovate and seize opportunities to increase access and improve affordability.

“While we’ve certainly seen some bold rate predictions for the rest of the year and beyond – with some predictions of three more cuts – I’m hopeful this isn’t the last one we’ll see this year as inflation hopefully turns a corner and the central bank prioritises the health of the economy.”

The BoE’s next base rate decision will be announced on 18 September.

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