UK Interest Rates Set to Drop Again – Is Now the Time to Lock In a Deal?

The UK housing and mortgage market may be entering a turning point — with the Bank of England expected to cut rates again this August. After four cuts since 2024, another drop could ease pressure on borrowing costs, offering fresh momentum to homebuyers, movers and remortgagers.

While inflation remains slightly above target, economic signals suggest a cooling environment — prompting speculation that lower rates are not only likely, but imminent. Here’s what borrowers should know before the next rate announcement.

The Bank of England left interest rates unchanged at 4.25% in June, but Governor Andrew Bailey made it clear that further reductions remain on the table. Following cuts in August and November 2024, and again in February and May 2025, analysts believe the next drop could arrive as soon as 7 August.

Bailey described the Bank’s approach as “gradual and careful,” reflecting both inflationary caution and economic softening. Still, with borrowing costs historically high and market pressures growing, the direction of travel is clear: rates are expected to continue falling, if slowly.

Interest rates are a tool to control inflation, and while inflation has fallen significantly from its 2022 peak of 11.1%, the latest figure — 3.6% in the 12 months to June 2025 — remains above the Bank’s 2% target. Despite this, most forecasters agree a rate cut is likely at the next meeting.

For mortgage holders, particularly those with variable or tracker deals, a cut could ease monthly costs. But even those on fixed deals — especially those due to remortgage in the next year — may benefit if lenders pass on savings through better pricing.

Meanwhile, savers could see reduced returns, with the average easy-access savings rate currently at 2.67% — a figure that may fall if the base rate does.