On 8 May, the Bank of England cut interest rates from 4.5% to 4.255 – the lowest rate since May 2023.

Even small shifts in interest rates can have a ripple effect on everything from your mortgage repayments to the return on your savings.  BBC Finance expert and Financielle co-founder Laura Pomfret explained all on 6th May, 2025, before the cut was made.).

Interest rates are a powerful tool. They influence:

• How expensive it is to borrow money (mortgages, loans, credit cards).

• How much you earn on your savings.

The Bank adjusts rates to control inflation, aiming for a steady 2% rise in the cost of goods and services. Right now, inflation is sitting slightly above that at 2.6%.

A cut would make borrowing cheaper 💸 – but it also means lower savings rates, which can hit your returns quickly.

Could this be good news for mortgage holders?  🏡

It depends on what type of mortgage you have – and that’s your first step: check!

• Tracker mortgages – these follow the Bank’s base rate. Around 600,000 people in the UK have one, so if the base rate drops, their repayments drop too – often the following month.

  Example:
  On a £100,000 tracker mortgage at 6.5% (base + 2%), repayments are approx. £675/month. If the base rate drops by 0.25%, that falls to around £660/month – saving £15.

• Fixed-rate mortgages – these stay the same until the end of your deal. But if your fix ends in the next six months, start looking now. Some lenders let you lock in new rates 3–6 months early – and many will let you switch again if rates fall before your new deal starts.

💡 Fixing gives you certainty, but comes with the risk of being locked into a higher rate if interest rates drop again. Speak to an independent, regulated mortgage advisor for personalised advice.

What about pensions? 👵🏼

A change in interest rates won’t affect the State Pension, but it can impact your private or workplace pension, particularly if you’re close to retirement.

That’s because many pensions are partly invested in bonds and cash, which tend to deliver lower returns when interest rates fall.

Need guidance?
Check out resources like AgeUK and MoneyHelper, or speak to a regulated financial adviser.

What does this mean for savings? 🤑

If you’ve got money in savings, this is your heads-up. Savings providers often act fast when interest rates change – and not in your favour. Top deals have already started disappearing.

Here’s how to protect your savings:

📌 Check your current rate – many older accounts pay far less than new deals.
🔎 Shop around – use comparison sites to find better rates.
🏦 Review your current account – they often pay very low interest.
🔐 Fix your savings – locking in a rate now could protect your returns, but check the rules on early withdrawals.
🌿 Use your ISA allowance – earn interest tax-free on up to £20,000/year.

*Some of the Financielle team and community use Trading 212 to hold their savings, emergency funds and invest.

When investing your capital is at risk

What should you do right now? 🤔

Spend 30 minutes this week doing a mini money audit. All you need is a pen, some paperwork, and maybe a cup of tea.

1. Mortgage – Who’s your provider? When does your deal end? What rate are you paying?
2. Savings – What rate are you earning? Could you be doing better?
3. Debt – Are you paying high interest on loans or credit cards? Is switching an option?

✍️ Pro tip: Set a diary alert or calendar reminder for when your deals end. That way, you won’t miss the window to switch and save.

You can keep your policy details in check using the Life Admin area in the Financielle app for free, click here to get started.

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