What does the base rate cut this week mean for your finances?

10th May 2025

Anna Dowes writing for The Policy Office finance advice site looks at what the lower interest rate might mean.

This week, the Bank of England's Monetary Policy Committee (MPC) voted to reduce the base rate by 0.25% - from 4.5% to 4.25%. This is likely to be a relief for borrowers especially since Andrew Bailey has hinted that there will be more cuts to come, although he said that he will not "give predictions as to when and how much". The news is not likely to be welcomed by savers though, as savings rates will inevitably fall - in fact they are already starting to do so. However, it's also worth considering what impact a base rate cut may have on your wider finances.

What a base rate cut could mean for your finances

It's not just the base rate that affects our finances. Government policy has a huge impact too. Tighter regulation and rising costs on second homes for example, means that many of those with more than one property are questioning whether the benefits that investing in property can bring, are still worth it.

Buy-to let and second homes time for a rethink?

Cash ISAs are another popular investment that could be subject to an overhaul. There is huge speculation that the cash ISA allowance will be slashed.

No wonder then that savers are piling as much as they can into cash ISAs at the moment, making the most of the allowance whilst it remains unchanged.

Cash ISA deposits increase amid fears that the allowance will be slashed