What Do Experts Have To Say About The Recent Interest Rate Cut?

The Bank of England’s Monetary Policy Committee voted to lower the Bank Rate from 4.25% to 4%. It is the lowest level since March 2023. This came after a rare second round of voting, with 5 members backing the cut and 4 voting to keep rates unchanged. Governor Andrew Bailey described the decision as “finely balanced”.

The committee said it has seen strong disinflation over the past two and a half years after earlier economic shocks. It believes that the progress has been helped by the restrictive stance of monetary policy, which now allows for a gradual reduction in rates. Recent figures show 12-month CPI inflation rose to 3.5% in the second quarter of 2025, driven mainly by higher energy, food and administered prices.

Inflation is forecast to rise slightly to 4% in September before falling back towards the Bank’s 2% target. Pay growth has eased but remains high, and the committee will watch closely to see how that feeds into consumer prices.

 

What Is The State Of The UK Economy?

 

The Bank’s latest outlook sees subdued GDP growth… It expects the economy to grow by 1.25% in 2025. The labour market is showing early signs of loosening, with a margin of slack now judged to have appeared. Higher payroll taxes and minimum wage increases have added pressure to businesses, and wage pressures are still present, though they have eased in recent months.

The Bank brought up that downside risks to economic activity are still there, especially from domestic and geopolitical factors. Trade policy uncertainty has eased slightly compared to earlier in the year.

Underlying domestic price and wage pressures have continued to weaken, although not at the same pace across sectors. Services inflation has been quite steady in recent months.

Experts have shared what they think about the cut…

 

Our Experts:

 

Alastair Douglas, CEO, TotallyMoney
Jonathan Steenberg, UK Economist, Coface
Aman Parmar, Head of Marketing, BizSpace
Joseph Lane, Founder and Director, Mortgage Lane
George Vessey, Lead FX & Macro Strategist, Convera
Victor Trokoudes, Founder and CEO, Plum

 

Alastair Douglas, CEO, TotallyMoney

 

 

“Further cuts will help stimulate the economy by reducing the cost of borrowing and driving investment. Fintech has felt the of brunt of higher rates, but with more money moving into the sector, and new technologies driving innovation, we should see faster improvements in both the financial services and customer outcomes.”

 

Jonathan Steenberg, UK Economist, Coface

 

 

“This decision will offer welcome relief to businesses grappling with high debt servicing costs, particularly SMEs, which tend to be more exposed to floating-rate debt. However, the narrow vote underscores growing uncertainty around the future path of interest rates.

“We may now see fewer rate cuts than previously anticipated. This matters because our baseline forecast assumes a gradual reduction in rates over the next 18 months, which supports a modest easing in insolvency pressures by 2026. If the Bank delivers two fewer 25 basis point cuts than expected, our outlook could shift toward a slight rise in insolvencies instead.”

 

Aman Parmar, Head of Marketing, BizSpace

 

 

“The decision by the Bank of England to cut the base interest rate to 4% marks a significant shift in the financial landscape for British SMEs. This reduction – the lowest level seen in over two years – is poised to provide much-needed relief to small and medium-sized enterprises struggling with rising costs and economic uncertainty. Lower borrowing costs can empower SMEs to invest in growth, improve their cash flow management and better navigate the complexities of the current market.

“The interest rate cut occurs amidst a broader shake-up of the trade environment, shaped by factors such as US tariffs on EU exports and the UK Government’s newly launched Small Business Plan. As EU businesses reassess their operational strategies in response to these tariffs, the UK may find itself positioned as a viable alternative for firms looking to maintain access to the US market while avoiding high tariffs imposed on exports to the EU. This unique trade dynamic could enable UK SMEs to thrive as they navigate rising costs and economic uncertainty.

“The government’s initiatives, such as the introduction of a Small Business Commissioner to tackle late payments and a £4 billion support package aimed at easing financial pressures, further strengthen the position of UK SMEs during challenging times. These measures offer greater financial certainty and improved access to funding for SMEs, which are essential for effective cash flow management, particularly given the ongoing challenges of late payments that cost the UK economy approximately £11 billion each year.

“As the economic landscape continues to shift, British SMEs must adapt their strategies to capitalise on the benefits of lower interest rates and the potential influx of businesses relocating from the EU. The UK’s strategic geographical positioning as a gateway to both European and global markets enhances its appeal for companies seeking stability amid changing trade conditions.

“Through our work with a diverse range of SMEs in flexible workspaces, we’ve seen firsthand how businesses can adapt to changes like the interest rate cut, but there are several key factors to consider when navigating these new opportunities. Understanding the implications of tariffs is crucial, as they can affect profit margins and pricing strategies for exports to the US; awareness of currency risks is also essential, as fluctuations can impact competitiveness. Familiarity with local regulatory compliance is vital to avoid penalties and delays, while effective logistics planning ensures supply chain efficiency. Conducting thorough market research will help SMEs identify target customers and tailor their products effectively.

“The interest rate cut signals an increasingly supportive environment for UK SMEs, helping them invest in growth despite a chaotic trade landscape. The combination of lower borrowing costs and strategic government initiatives offers a glimmer of hope for struggling UK SMEs, providing the support they need to navigate challenges and work towards a more stable future in a competitive global economy.”

 

Joseph Lane, Founder and Director, Mortgage Lane

 

 

“Today’s cut in the base rate will no doubt come as welcome news to first-time buyers looking to take their first steps onto the property ladder. High street lenders will likely respond by lowering mortgage rates, thereby improving affordability and reducing the size of monthly repayments.

“That being said, the potential for increased demand in the market must also be acknowledged, as this could drive house prices further upward. For first-time buyers with limited deposits, the benefit of cheaper borrowing could be offset by increasing property values.

“Existing homeowners who are coming off fixed-rate deals taken out during the last two years at higher interest rates should now find themselves with more favourable remortgaging options. A lower base rate typically leads to reduced fixed and tracker product rates, allowing for smaller monthly repayments and improved financial flexibility.

“However, those who locked in during the pandemic when ultra-low rates around the 2-3% mark were being offered may still find the current deals more expensive than what they are used to, despite this rate cut being a step in the right direction.

“Landlords holding variable rate-BTL mortgages may see an immediate benefit from this rate cut through lower repayments and improved profit margins. This could reduce the pressure to increase rents, and potentially prevent forced sales that might have otherwise reduced rental supply.

“HMO (House in Multiple Occupation) landlords in particular may find this cut presents opportunities to refinance, releasing capital for refurbishment or expansion. With many operating on interest-only models, lower rates could ease financial pressure and facilitate portfolio growth or maintenance.

“As always, while the rate cut is broadly positive for the property and lending markets, it’s critical for all stakeholders (buyers, homeowners, and investors) to seek personalised advice. The real impact will depend on individual circumstances, existing product terms, and how lenders respond.

“The market remains volatile and challenging, and lenders may not pass on the full benefit of the rate cut to all landlords. Keeping a close eye on product availability will be key over the coming weeks and months.”

 

 

George Vessey, Lead FX & Macro Strategist, Convera

 

 

“The Bank of England’s 25-basis point rate cut to 4% yesterday has sparked debate over whether the easing cycle is nearing its end. Despite the cut, the tone was unexpectedly hawkish, with policymakers warning that monetary policy is becoming less restrictive. Markets now expect only two more cuts by mid-2026, and none for the rest of 2025. The decision was deeply divided, requiring a historic two-round vote.

“Initially, the vote split was a deadlock: 4 members voted to cut, 4 to hold, and 1 for a more aggressive 50bp cut. That forced a recast, with dovish outlier Alan Taylor switching his vote from 50bp to 25bp, tipping the final tally to 5-4 in favour of a cut. The split highlights tension between rising inflation, now expected to peak at 4% in September, and signs of labour market strain after higher payroll taxes and minimum wage hikes.

“But it’s the four votes to hold rates steady that caught markets off guard. The pound jumped higher on the news, in line with surging gilt yields, as traders recalibrated expectations for further easing. The odds of another cut in Q4 have now dropped to less than 65%, down from over 90% before the decision.

“Two-year gilt yields recorded their biggest daily gain in a month and could prove to be a key support for sterling. However, the UK is grappling with a stagflationary mix: stubborn inflation and weakening growth. Services inflation remains elevated, while real GDP contracted in April and May. So, this toxic backdrop might cap how much support sterling can draw from higher yields over the long term, especially as its real yield advantage might diminish.

“Still, GBP/USD has now risen for five days straight, its best streak since mid-April, and trading over 1% higher so far this week to reclaim the $1.34 handle. Meanwhile, GBP/EUR is primed for its best week in seven, attempting to overthrow the 21-day moving average at €1.1525.”

 

Victor Trokoudes, Founder and CEO, Plum

 

 

Economic analysis

“Today’s decision by the Bank of England (BoE) to cut the base rate by 0.25 percentage points to 4% had been broadly expected.

“The previous vote had seen a 6-3 split, so there was already significant demand among the Committee for a rate reduction. And recent disappointing economic data, including the economy shrinking in May by 0.1%, helped ensure there was a majority for a fifth cut since last August.

“This decision may come as a surprise to some, since the latest inflation reading was 3.6%, well ahead of the central bank’s target of 2%, as well as the Bank’s focus on a ‘gradual and careful approach’ to decreasing rates. What will have concerned the central bank most about the inflation reading was food prices being a key driver of the rise.

“But the economic clouds are gathering, and it’s part of the BoE dual mandate to protect and enhance financial stability as well as keep inflation in check. Concerns over stagflation are rising again, and the data is all the more concerning when combined with the news that the labour market is weakening following additional employer taxes going live.

“There are still large levels of concern about how much impact US tariffs will have on the global economy, even though the UK appears to be among the countries better positioned to navigate this.

“The general uncertainty is being reflected in the amount of money that consumers are setting aside rather than spending. Households’ deposits with banks and building societies increased by £7.8 billion in June from May, following a net increase of £4.3 billion in May from April. Given consumer spending is key to the UK’s economic recovery, the BoE will be hoping this rate cut will encourage more people to start purchasing more.

“At least one more rate decrease this year is already priced in by the markets, with the base rate potentially dipping below 4% by the end of the year.

Consumer Analysis
What’s happened?

“Today, we saw the Bank of England cut the interest rate by 0.25 percentage points from 4.25% to 4%, which was widely speculated.”

What does the latest BoE rate mean for your money?

“Borrowers of loans and mortgages will be welcoming today’s announcement that the Bank of England’s base rate will decrease. A cut means less to pay back for those looking to borrow money, and variable mortgage rate holders, including those with a tracker mortgage.

“As for remortgagers, most will already likely be facing a new, higher rate compared to their existing mortgage and frustratingly for them, the reduction in mortgage rates has appeared to have stalled, or may have even reversed. For example, the quoted monthly interest rate on a 2-year fixed mortgage LTV 75% was 4.32% in June, having been 4.19% in May. Today’s cut could help to encourage lenders to resume lower-priced mortgages, with swap rates potentially adjusting to reflect lower base rate expectations.

“Meanwhile, savers can make the most of rates continuing to be high by getting inflation-beating returns on the money they set aside. Many high street banks have tended to be slower to increase interest rates in line with the base rate rises and quicker to cut their rates on savings when the base rate falls, so it’s important to explore other options – smaller banks, building societies, and fintechs are offering highly competitive rates.”

 

Lee Holmes, CEO, INFINOX

 

 

“The Bank of England’s decision to lower interest rates to their lowest level in two years represents a decisive change in the UK’s monetary landscape, and this shift is already being reflected in the markets INFINOX operates in. The pound moved lower in response as the reduced yield outlook altered currency valuations, with notable activity across major GBP pairs such as GBP/USD and EUR/GBP. This type of policy adjustment often triggers recalibration among market participants as they reassess relative interest rate differentials, which remain a key driver of forex pricing.

“In CFDs, the rate cut has also influenced sentiment towards UK equity indices and government bond products. Indices sensitive to borrowing costs, such as the FTSE 250, have experienced movements linked to the changing outlook for corporate financing conditions and domestic demand. Meanwhile, gilt prices have been impacted by the expectation of a lower-for-longer rate environment.

“For traders, this kind of macroeconomic development tends to increase intraday and short-term volatility, as market participants respond to both the decision itself and any accompanying guidance from policymakers. The implications extend beyond the immediate reaction, as currency and index markets often continue to digest the change over several sessions, incorporating new economic data and global market conditions into pricing.”