How Low Will UK Interest Rates Go This Week?

On Thursday, the Bank of England (BoE) will make a decision that could decide the UK’s economic path for months to come – the decision about UK interest rates. With growth slowing, jobs at risk and global trade tensions rising, the question is no longer whether the Bank will cut interest rates; it’s when and by how much.

Markets are betting on a safe, quarter-point reduction, taking the base rate from 4.5% to 4.25%. But some economists argue that’s not enough. They’re calling for a half-point cut to give businesses and households real relief. What is the right move? And just how far will rates fall this year?

Why a Cut Is Coming

The writing’s been on the wall for weeks. Governor Andrew Bailey warned last month that the UK is facing a "growth shock", thanks in part to Donald Trump’s escalating trade wars. The International Monetary Fund (IMF) has slashed its 2025 UK growth forecast from 1.6% to 1.1%, a grim revision that reflects weaker exports, lower investment and sagging consumer confidence.

Add sluggish wage growth and a cooling job market and the case for lower rates becomes hard to ignore. The Bank’s job is to keep inflation in check while supporting the economy. The bigger risk isn’t prices rising too fast, right now, it’s growth grinding to a halt.

The Quarter-Point vs Half-Point Debate

Most analysts expect a 0.25% cut this week, a cautious move that signals worry without panic. Financial markets are pricing this in as a near-certainty. But some argue the Bank should go bigger.

Even some within the BoE have been saying that high borrowing costs are strangling small businesses and mortgage holders. If they dig in their heels this week, expect to see a half-point reduction.

The argument for going bold: a quarter-point might not be enough to jolt the economy back to life. With inflation now below target (2.3% in the latest reading), the Bank has room to act decisively.

How Low Could UK Interest Rates Go in 2025?

This week’s cut might just be the start. Analysts predict rates could fall to 3.25% by the end of the year, a full 1.25 percentage points lower than today. That would mean at least two, possibly three, more cuts in the coming months.

Much depends on how the global economy holds up. If Trump’s trade wars drag on, or if Europe’s slowdown deepens, the Bank may have to move faster. But should inflation unexpectedly spike (say, from another oil price surge), policymakers could hit pause.

Conclusion: What It Means for the Property Sector

Lower rates could bring some relief for homeowners, but especially for those on tracker mortgages. Savers, though, will feel the pinch; already measly returns on savings accounts could shrink even more. Businesses, particularly those reliant on borrowing, will cheer cheaper loans, which could help stave off layoffs or even spur hiring.

The bigger picture is that cut too little and the economy might keep limping along. Cut too much, too fast and they risk fuelling debt bubbles or leaving themselves with no ammunition if another crisis hits.