By clicking a retailer link you consent to third-party cookies that track your onward journey. This enables W? to receive an affiliate commission if you make a purchase, which supports our mission to be the UK's consumer champion.
The Bank of England has today reduced its base rate from 4.75% to 4.5%.
The Bank's nine-person Monetary Policy Committee (MPC) voted 7-2 in favour of cutting the rate by 0.25 percentage points.
Read on to find out what the rate cut means for you, whether you're buying a home, are due to remortgage, or trying to get the best return on your savings.
Find the right mortgage using the fee-free service provided by L&C Mortgages
Compare mortgagesIf you click on the link and complete a mortgage with L&C Mortgages, L&C is paid a commission by the lender and will share part of this fee with Which? Ltd helping fund our not-for-profit mission. We do not allow this relationship to affect our editorial independence. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
At the first opportunity this year, the base rate has been reduced by 0.25 percentage points, bringing it down to 4.5% with immediate effect.
The cut had been expected, following a closer-than-expected vote at the last meeting and news that inflation dipped to 2.5% in December.
In its report, the MPC said there had been 'substantial progress on disinflation over the past two years' but that domestic inflationary pressures 'remain somewhat elevated, and some indicators have eased more slowly than expected'.
If you're due to remortgage at the end of a fixed-term mortgage, today's cut probably won't make a big difference to the rate you'll get. We know this from the impact the last base rate reduction had on fixed mortgage rates.
Since the base rate was last reduced in early November, the averages of two and five-year fixed mortgage rates have increased. Generally, since the start of 2025, the top rates for two and five-year fixed mortgages have also risen slightly.
Fixed mortgage rates are priced using forecasts of the base rate and several other factors over the mortgage term. As a result, today's decision will have a limited impact on rates.
Instead, the attitude the Bank has shown to future base rate cuts will play a more significant role in shaping fixed-rate mortgages.
Simon Gammon, Knight Frank Finance, explains: 'This is positive for borrowers - interest rates are moving in the right direction, albeit slowly. However, we don’t expect mortgage rates to fall immediately. Today’s reduction was already ‘priced in’, and we’ll need a material shift in the outlook to enable mortgage rates to fall meaningfully.'
If you're on a variable-rate mortgage, however, your rate should fall. Trackers, which are linked to the base rate, will drop by 0.25 percentage points.
Standard variable rate (SVR) mortgages and discount mortgages will fall if individual lenders reduce their SVRs in response to the announcement.
We've rounded up the current top rates for remortgaging across a range of loan-to-values for two and five-year fixed-rate mortgages.
| Two-year fixed-rate | 60% | Halifax | 70% | 4.28% | £1499 | 8.24% |
| Two-year fixed-rate | 60% fee free | Leeds Building Society | 72% | 4.62% | £0 | 7.49% |
| Two-year fixed-rate | 75% | Yorkshire Building Society | 68% | 4.39% | £995 | 6.99% |
| Two-year fixed-rate | 75% fee free | Leeds Building Society | 72% | 4.68% | £0 | 7.49% |
| Two-year fixed-rate | 90% | Newcastle Building Society | 71% | 5.05% | £999 | 6.94% |
| Two-year fixed-rate | 90% fee free | Newcastle Building Society | 71% | 5.25% | £0 | 6.94% |
| Five-year fixed-rate | 60% | RECOMMENDED PROVIDER First Direct | 75% | 4.14% | £490 | 6.99% |
Data from Moneyfacts, correct as of 6 February 2025. Customer scores are based on a survey of 3,556 members of the public in August-September 2024 and combine overall satisfaction with likelihood to recommend the provider. The average customer score is 70%. To become a Which? Recommended Provider a lender must get a top customer score, consistently offer competitive deals and be fully covered by the Financial Conduct Authority banking standards regime. 'Revert rate' is the standard variable rate (SVR), which is the mortgage rate you'd be transferred onto when your deal ended if it remained unchanged between now and then.
The past few years have been frustrating for those looking to move home, as high borrowing costs have significantly impacted affordability.
First-time buyers and home movers will be hoping that today's decision is followed by further cuts in the first half of the year.
The next MPC meeting looks finely balanced with the committee still worried about 'the risks around inflation persistence' and 'uncertainties around the trajectories of both demand and supply in the economy', but two members are already showing the appetite for another cut.
If the committee votes to lower the base rate again in March, home buyers could finally see rates fall.
We've rounded up the current top rates for home movers and first-time buyers across a range of loan-to-values for two and five-year fixed-rate mortgages.
Nicholas Mendes of the mortgage broker John Charcol says: 'With swap rates on a downward trajectory, lenders have scope to reduce mortgage rates further. Lower swap rates ease borrowing costs, allowing lenders to adjust pricing and improve affordability for both existing homeowners and prospective buyers. However, the pace and extent of mortgage rate reductions will also depend on lender margins, inflation, and broader market competition.'
The base rate cut will likely result in banks reducing the amount of interest they offer on savings accounts, providing a blow to people looking for the best return on their money.
Accounts with variable rates are likely to see the biggest rate reductions, as fixed-rate accounts have already priced in base rate cuts.
For example, the top one-year fixed-rate savings account has dropped by just 0.07% since the last base rate drop in November.
However, it may take some time for variable-rate accounts to adjust. For example, Cahoot’s market-leading instant access account took nearly a month to lower its rate following the base rate drop in November.
Our table sets out the top savings rates at the moment across instant-access and fixed-rate accounts.
| Instant access | Cahoot | 4.75% (a) | 61% | £1 | Internet | Monthly, yearly |
| One-year fixed-rate | Vida Savings | 4.77% | n/a | £100 | Internet | Monthly, yearly |
| Two-year fixed-rate | Zenith Bank (UK) Ltd | 4.65% | n/a | £1,000 | Internet, mobile app | Yearly |
| Three-year fixed-rate | Birmingham Bank | 4.63% | n/a | £5,000 | Internet | Yearly |
| Four-year fixed-rate | Oxbury Bank | 4.54% | n/a | £1,000 | Internet | Yearly |
| Five-year fixed-rate | JN Bank | 4.6% | n/a | £100 | Internet | Yearly |
Table notes: rates sourced from Moneyfacts on 6 February 2025 and based on a balance of £1,000. Provider customer score is based on savers' overall satisfaction with the brand and how likely they are to recommend it to others. n/a means sample size was too small for us to generate a provider score (a) 4.75% interest on balances up to £3,000
The MPC has adopted a cautious approach to reducing the base rate, while keeping a close watch on the risk of inflation rising.
Experts expect the base rate to fall further over the next year, but don't anticipate that it will return to the very low levels recorded over the last decade.
The Office for Budget Responsibility (OBR) forecasts that the base rate will average 3.9% in 2025 and 2026.
However, uncertain economic conditions mean this prediction may be revised when the OBR next publishes its base rate forecasts in the spring.
Find the best deals, avoid scams, and grow your savings with our expert guidance. From only £4.99 a month.
Join Which? MoneyCancel anytime.
