Bank of England Holds Interest Rate at 4.25%: What It Means for Your Mortgage, Savings, and Finances
The Bank of England has held its base rate at 4.25%. Our UK guide explains why and what this means for your mortgage, savings, and finances in 2025.
The Bank of England has today announced its decision to hold the UK's base interest rate steady at 4.25%. The move, which was widely anticipated by economists, signals a "wait-and-see" approach from the rate-setting Monetary Policy Committee (MPC) as it navigates persistent inflation and global economic uncertainty.
For millions of people across the UK, this decision has direct consequences for their most significant financial commitments, especially their mortgages. At Plouta, our mission is to provide you with clear, timely insights to help you understand these changes and manage your money with confidence. This guide will explain why the Bank has paused, what it means for your mortgage, and the impact on your savings and other debts.
What you will learn in this guide: ⤵
Why the Bank of England Held the Base Rate: The key economic factors behind the decision.
The Immediate Impact on Your Mortgage: What this means for tracker, variable, and fixed-rate mortgages.
Are Cheaper Mortgage Deals Still Coming? A look at what could happen next.
What This Means for Savers: The effect on savings accounts and interest rates.
The Broader Picture: How this decision fits into the UK's economic landscape.
Why Did the Bank of England Hold the Rate at 4.25%?
After a series of rate cuts that began in August 2024, taking the base rate down from a peak of 5.25%, today's decision to hold at 4.25% marks a pause in the Bank's easing cycle. The MPC voted by a majority of 6–3 to maintain the rate, with the three dissenting members preferring a further 0.25% cut to 4.0%.
The key reasons behind the decision include:
Persistent Inflation: The latest figures from the Office for National Statistics (ONS) showed that UK inflation (as measured by the Consumer Price Index - CPI) held steady at 3.4% in the 12 months to May. While this is a significant drop from the highs seen in previous years, it remains stubbornly above the Bank's official 2% target.
Concerns Over Services Inflation: While overall inflation has eased, the Bank remains watchful of "sticky" underlying price pressures, particularly in the services sector and from wage growth, which has continued to moderate but remains a key focus.
Global Economic & Geopolitical Uncertainty: The Bank's summary explicitly mentioned that "global uncertainty remains elevated," citing rising energy prices due to geopolitical conflict and the unpredictable nature of international trade policies.
In short, while the economy has shown signs of weakening and the labour market has loosened, the Bank is opting for a cautious, gradual approach, wanting to see more definitive evidence that inflation is sustainably returning to its 2% target before cutting rates further.
What Today's Rate Hold Means for Your Mortgage
The impact of this decision depends entirely on the type of mortgage you have.
1. If you have a Tracker Mortgage: Your monthly payments will remain unchanged for now. Tracker mortgages are directly linked to the Bank of England's base rate (e.g., Base Rate + 0.75%). As the base rate has not moved, your interest rate and monthly payment will not move either. You would have already benefited from the previous cuts and will be among the first to see your payments drop if the Bank cuts rates again in the future.
2. If you have a Standard Variable Rate (SVR) or Discount Mortgage: Your payments will also likely remain unchanged for the time being. An SVR is set by your lender and, while it's influenced by the base rate, it doesn't have to move in lockstep. Given today's hold, it's highly unlikely any lender will change its SVR.
3. If you have a Fixed-Rate Mortgage: Your monthly payments are completely unaffected. The "fix" in your mortgage deal means your interest rate and monthly payment are locked in for the duration of the term (e.g., 2 or 5 years), regardless of what the Bank of England does. This provides valuable certainty for budgeting.
What if your fixed-rate deal is ending soon? This is where the decision has the biggest impact. If your fix is ending in the next 3-6 months, you will be looking for a new deal in the current market. Today's rate hold was largely expected, so it shouldn't cause any immediate shocks to mortgage pricing. However, it reinforces that the path for future rates remains uncertain.
Plouta Tip: Lenders price their fixed-rate deals based on future expectations of interest rates (known as "swap rates"). Even with the base rate on hold, these can fluctuate. If you are nearing the end of your fix, it is crucial to start looking for a new deal now. You can typically lock in a new mortgage offer up to six months in advance, allowing you to secure a rate while giving you the flexibility to switch if a better deal comes along before you complete.
Are Cheaper Mortgage Deals Still Coming in 2025?
While a rate cut would have been welcome news for borrowers, the market consensus is still pointing towards further reductions later this year.
Market Expectations: Financial markets are currently pricing in one to two further 0.25% rate cuts by the end of 2025, with many economists pointing to the MPC's August meeting as the next likely opportunity for a cut, provided inflation and wage data continue to cool.
Lender Competition: The mortgage market remains highly competitive. While some lenders have edged their fixed rates up slightly in recent weeks due to fluctuating swap rates, others have continued to offer deals below 4%. A period of stability from the Bank of England may encourage some lenders to trim their rates modestly to attract business.
The Verdict for Borrowers: There is no need to panic. Today's hold provides a period of stability. For those on tracker or variable rates, payments remain steady. For those needing to remortgage, competitive deals are still available, and the prospect of lower rates later in the year remains on the table.
What Does the Rate Hold Mean for Savers?
For savers, today's decision is a mixed blessing.
A Temporary Reprieve: Over the past year, as the base rate has fallen from its peak, savings rates have been slowly declining from the highs of over 6%. Today's hold means that providers of variable-rate savings accounts are less likely to make immediate further cuts.
The Clock is Ticking for Top Rates: However, the general expectation of future rate cuts means that the best fixed-rate savings deals on the market are unlikely to last forever. If you have cash you are looking to save and want to lock in a good rate, now is a good time to act. Rates on the best fixed-term savings accounts and Cash ISAs are still competitive.
How Financially Well Are You Really?
Take the Plouta financial wellness 1 minute test to discover how healthy your finances are.
Conclusion: A Pause for Thought, Not a Change of Direction
The Bank of England's decision to hold the base rate at 4.25% is a prudent move in the face of persistent, though easing, inflation. It provides a moment of stability for millions of homeowners and savers.
For those on variable-rate mortgages, it means no immediate change, while for those nearing the end of a fixed deal, it reinforces the need to plan ahead in a market that still anticipates lower rates in the future. For savers, it offers a window of opportunity to secure the competitive rates that are still available.
The direction of travel for interest rates still appears to be downwards, but the journey will be a gradual and cautious one. As a homeowner or saver, staying informed and planning ahead remains your most powerful strategy.
Get one-to-one financial advice
We’ll find a financial adviser perfectly matched to your needs. Getting started is easy, fast and free.
Disclaimer: This article provides general information about the Bank of England's interest rate decision as of 19 June 2025 and is for informational purposes only. It does not constitute financial advice. Mortgage and savings rates can change, and the best course of action depends on your individual circumstances. Always seek independent financial advice from a qualified mortgage broker or financial adviser before making any decisions.
