Base Rate cut to 4.5% what does this mean for UK mortgages

The Bank of England has cut the Base Rate by 0.25% to 4.5% as of 6th February 2025. This is the first rate cut of the year, following two rate cuts in 2024 and a hold at 4.75% in December.

The Monetary Policy Committee meets every six weeks to set interest rates to maintain economic stability and keep inflation near the government’s 2% target. As of December, inflation sat at 2.5%, slightly above this target.

Mortgage rates have risen slightly but some lenders have reduced rates on various products. In the past week the average rate for a 2 year fixed mortgage dropped 0.02% to 5% while the 5 year fixed rate now averages 4.79%*.

Industry experts say while some mortgage rates have risen, particularly in certain loan to value bands, average rates are below their January highs. The outlook for borrowers is steady, with lenders able to reduce pricing if the Base Rate continues to drop in 2025.

For those on fixed rate mortgages, monthly payments will remain the same until the end of the fixed term. However those with tracker or variable rate mortgages linked to the Base Rate may see a reduction in their monthly payments with this cut.

Looking forward, markets had been expecting up to four Base Rate cuts in 2025 but ongoing inflationary pressures have adjusted expectations to two or three 0.25% cuts, potentially bringing the Base Rate down to 4% or lower by year end.

The rate cut will result in lower borrowing costs for homeowners with a base rate tracker mortgage, as their rate will adjust accordingly. However, borrowers on their lender’s standard variable rate (SVR) or a mortgage tied to it will need to wait and see what happens.

At Eden Hawk Financial Solutions we know navigating these changes can be confusing, especially for first time buyers trying to get into the market. Our team is here to guide you through it all and help you understand how this affects your homeownership journey.

With the Base Rate cut now is a good time to review your mortgage options. Contact us today to find out how we can help you get a mortgage that fits your circumstances.

*These rates are provided by Podium and are an average based on 95% of the mortgage market. All rates are based on products with a circa £999 fee.