Bank of England cuts rates to 4.25% – consumer credit industry reaction

The Bank of England has announced that it has reduced the Bank Rate by 0.25% to 4.25%, marking the second cut this year. The MPC voted 5 to 4 in favour of the cut, with two members preferring to cut rates by 0.5% to 4.0% and two preferring to leave rates unchanged at 4.5%.

Commenting on the announcement, Paul Noble, CEO of Chetwood Bank, said “Following a second consecutive fall in inflation, many were expecting a bolder move from the Bank of England. The decision to cut rates by 0.25% rather than half a percentage point might appear underwhelming to some, given the challenges that are being faced – especially the uncertainty around Trump’s tariff hikes.

“While the central bank has taken a cautious approach for some time, today’s move could risk underutilising a vital opportunity to restore confidence and stimulate growth in the market. That will come from the MPC making bold, market-altering decisions at its monthly meetings, rather than smaller, potentially less impactful changes that fail to make the most of our current inflationary improvements.

“For savers, the rates available today may be the most competitive we’ll see for some time, so it’s important they take steps to protect their financial position. A quick review of your savings could help ensure your money continues to deliver value, and that you’re not missing out on the strongest rates while they last.”

Sarah Coles, Head of Personal Finance from Hargreaves Lansdown said “This is more good news for remortgagers, whose growing sense of dread at the thought of a looming deadline will have been easing somewhat as rates have moved lower. The mortgage price war was already well underway before this announcement, as lenders priced in the expected cut. The average two-year fix is now 5.15%, down from 5.33% at the start of April. Lenders have been cutting rates across the board, and most lenders now offer sub-4% deals. The fact there are more cuts expected later this year will mean there’s scope for them to move even lower. However, the Bank has warned that cuts aren’t guaranteed, and a sizeable surprise from the other side of the pond still has the potential to set rates on a different course.

“Even if we get the cuts we expect, it doesn’t mean borrowers are on safe ground, because their new deal is still likely to be significantly pricier than their old one. The HL Savings & Resilience Barometer found that those who have remortgaged since rates shot up have an average of £178 in their current account, so it’s vital to plan ahead for how you will afford the extra expense.”

John Phillips, CEO of Just Mortgages and Spicerhaart, said “Today’s decision was clearly not a surprise, with financial markets pricing in a cut with unanimous certainty. What will be interesting though is what happens next and whether today’s call is the opening of the flood gates for further and more frequent cuts – with some predicting three or even four more cuts in 2025. While there’s no question that President Trump’s trade war has forced the central bank to act with some urgency, so have fears around inflation and both business and consumer confidence – particularly in response to higher taxes and costs.

“Either way, movement on the base rate is absolutely welcomed and will certainly help to stimulate demand. Given the certainty around today’s news, we’ve already seen swaps respond positively and lenders re-price, with the competition for market share likely only to increase with future moves. If not already, now is the time for brokers to mobilise – to get out into their local area to share this update. It’s so easy to get bogged down by the news right now, when in fact we can share something really positive with the many who have the appetite to buy, but need help navigating the market.”

Simon Webb, Managing Director of capital markets and finance at LiveMore, said “While this move may not immediately transform mortgage rates, today’s rate cut will provide relief to many borrowers, especially those coming to the end of fixed-rate deals or navigating affordability challenges in a high-cost environment. “For older borrowers, many of whom are on fixed incomes, a reduction in rates can be crucial in easing monthly payments or improving affordability assessments. It’s important that we continue to see innovation and competition in the later life lending space, so that more people aged 50 and over can access the finance they need without being unfairly penalised by outdated criteria or economic headwinds.”

Alan Davison, Chief Commercial Officer of Afin Bank said “Today’s Base Rate cut was never in doubt as the economy desperately needs a boost, but I’m not sure it will immediately trigger an increase in mortgage demand.

“Nationwide reported a 0.6% drop in house price growth in April, following a jump in transactions in March as buyers rushed to beat the stamp duty changes. Whether that recovers in the coming months depends on consumer confidence, which is thin on the ground.

“Growth predictions for the UK economy have been cut, while inflation is expected to rise again, leading to higher prices and further pressure on household finances. So the big question is could we see further rates cuts from the Bank of England, which could cause borrowers to hold fire on their mortgage plans until interest rates have stabilised.”