The first of many? What could a Bank of England cut mean for mortgage rates, funding costs, and economic momentum?
The Bank of England is widely expected to cut its base rate at its next meeting on 7 August, a move that could impact mortgage pricing and funding dynamics heading into the final stretch of 2025.
The base rate has held at 4.25% since June following four earlier cuts this cycle. While inflation edged slightly higher to 3.6% in the 12 months to June, it remains well below the 11.1% peak seen in late 2022. Despite this uptick, economists and markets are largely pricing in another 25bps cut in August, especially after BoE Governor Andrew Bailey’s recent remarks around continuing “gradual and careful” easing.
The expected cut is less about immediate rate drops and more about momentum. Most lenders are already factoring in expectations around the Bank’s trajectory, and swap markets continue to respond to inflation readings, economic data, and global signals. However, monetary policy easing cycle could support greater competition among lenders and spur buyers who have been watching rates for the past year.
Steven Barber, managing director at Bridging Finance Solutions, told Mortgage Introducer: “With the unemployment rate increasing to 4.7% annually between March and May , along with job vacancies falling between April and June by 56,000, undoubtedly the labour market is cooling as a result of April’s increases in National Insurance contributions and National Minimum wage. Hopefully this sees the first of a number of base rate reductions to give the sluggish economy a shot in the arm, whilst balancing the inflation tightrope.”
Even with the base rate well off its peak, average mortgage pricing remains elevated by historical standards. As of mid-July, the typical 2-year fixed deal stood at 5.03%, with 5-year fixes at 5.01%, according to Moneyfacts. Tracker products are hovering just under the base rate, at 4.91% on average. While brokers know fixed rates aren’t directly tied to the Bank’s rate, persistent inflation and wider market volatility have kept pricing stickier than borrowers might hope.
The industry is also bracing for a steady churn of fixed-rate maturities. On average, 800,000 mortgage holders per year are expected to exit ultra-low fixed-rate deals between now and 2027. Many of these borrowers are facing a meaningful jump in repayments, an issue that’s already sparking refinancing conversations and product switching inquiries. For brokers, this presents both a challenge and a clear business opportunity: clients are actively seeking guidance on navigating a rate landscape they no longer understand.
Alan Mackenzie, founder and broker at Your Next Step, said: “We’re already seeing a noticeable increase in remortgage enquiries, particularly from clients whose fixed rates are due to end in late 2025 and into 2026. Many of these borrowers have benefited from historically low rates for years, so there’s understandable anxiety about what lies ahead. Any news that suggests further reductions is welcome, and this latest signal from the Bank of England adds a sense of reassurance. It feels like we’re continuing on a downward path towards a more stable and manageable rate environment.”
Beyond mortgages, the expected cut may have marginal impacts on credit and savings products, though these are secondary to most broker-client discussions. What matters more is how brokers continue to position themselves as strategic advisors, not just rate hunters. With economic signals sending mixed messages—ranging from persistent core inflation to renewed geopolitical risks—the broker’s ability to interpret, communicate, and act decisively is more important than ever.
Ultimately, even if the Bank of England does move ahead with a cut on the 7th, it won’t suddenly unlock ultra-low rates or reshape affordability. But it will serve as a signal - one that brokers can use to reassure anxious borrowers, reframe refinancing timelines, and highlight the value of timely, personalised advice. The age of 1% rates may be gone, but so too is the chaos of peak inflation. In the middle ground, informed mortgage professionals will thrive.
