Mortgages
Just under a third of households have a mortgage, according to the government’s English Housing Survey, external.
About 500,000 homeowners have a mortgage that “tracks” the Bank of England’s rate. That means any cut means a reduction in the monthly repayments on their outstanding loan.
An additional 500,000 homeowners on standard variable (SVR) rates rely on their lender choosing to pass on any Bank rate cut.
But the vast majority of mortgage customers – some 87% – have fixed-rate deals. While their monthly payments aren’t immediately affected by a rate change, their future deals are.
As at 22 July, the average rate on a new two-year fixed deal was 5.57%, up from 4.83% at the start of March, according to the financial information service Moneyfacts.
For those looking for a five-year deal, the average rate was 5.6%, up from 4.95% over the same period.
The average two-year tracker rate was 4.51%.
About 800,000 fixed-rate mortgages with an interest rate of 3% or below are expected to expire every year, on average, until the end of 2027. Borrowing costs for customers coming off those deals are likely to rise sharply.
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Five ways to save money on your mortgage
Credit cards and loans
Bank of England interest rates also influence the amount charged on credit cards, bank loans and car loans.
Lenders can decide to reduce their own interest rates if Bank cuts make borrowing costs cheaper.
However, this tends to happen very slowly.
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Savings
The Bank base rate also affects how much savers earn on their money.
A falling base rate is likely to mean a reduction in the returns offered to savers by banks and building societies and vice versa.
As at 22 July, Moneyfacts said the average rate for an easy access savings account for a balance of at least £10,000 was 2.56%. The average rate for an easy access cash ISA was 2.75%.
The average rate for customers who were prepared to lock their money away for a year was 4.27%.
Cuts in rates particularly affect those who rely on the interest from their savings to top up their income.
What is happening to interest rates in other countries?
In recent years, the UK has had one of the highest interest rates in the G7 – the group representing the world’s seven largest so-called “advanced” economies.
In June 2024, the European Central Bank (ECB) started cutting the main interest rate for the eurozone from an all-time high of 4%, falling to 2% in June 2025.
However, in June 2026, the ECB raised rates to 2.25% as it reacted to the Iran war.
The US central bank – the Federal Reserve – has cut interest rates three times since September 2025, taking them to the current range of 3.5% to 3.75%, the lowest since 2022.
The Fed voted to hold rates at that level at its June meeting, the first under new chair Kevin Warsh.
US President Donald Trump had repeatedly attacked the previous Fed chair Jerome Powell for not cutting rates.
Warsh is expected to be generally more supportive of cuts, but will also have to respond to the fallout from the Iranian conflict. The Fed’s next rate decision will be announced on 29 July.
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