The Monetary Policy Committee met today. All 10 members voted, and a tight 5 to 4 voted for a reduction.

Well, it finally happened. The Bank of England has just cut interest rates for the first time since 2023, knocking them down a modest 0.25% to a still eye-watering 4%. It wasn’t unanimous, far from it. The MPC had what can best be described as a proper squabble behind the scenes, eventually limping over the line with a 5–4 vote in favour of the cut.

It gets better; they couldn’t even agree on what to vote on, so they held two separate votes. Democracy in action, folks.

Why now?

Despite inflation still hanging around like an awkward dinner guest (expected to hover around 4% into September), the majority of the committee decided the economy’s looking tired enough to justify a bit of help. Wage growth is easing, the jobs market is slowing, and the data suggests we’re drifting, not diving, but drifting toward a slowdown.

That was enough for five of the nine members to say, “Fine, let’s cut.”

The other four weren’t convinced. They’d had flashbacks to 2022, muttering something about inflation expectations and not wanting to move too soon. One member even wanted to cut by 0.5% and got firmly overruled, though fair play for ambition.

What does this mean?

Bailey called it a “finely balanced decision,” which is central banker code for “We argued a lot.” He also said rate cuts from here will be gradual and careful, which is banker code for “Don’t get excited.”

Markets, naturally, overreacted, pound up, gilt yields up, and the FTSE down, because apparently, a cautious rate cut in a fragile economy is bad for stocks now? 

What happens next?

Don’t hold your breath for a rate-cutting spree. The Bank now expects inflation to get back near its 2% target by mid-2027. Yes, you read that right, 2027. So, if you’re sitting on a variable-rate mortgage, there’s a chance things might ease a little, but don’t go mentally spending the savings just yet.

Most economists reckon we might get one more cut this year, probably around November, assuming the economy continues its gentle stagger and inflation doesn’t throw another tantrum.

My take

This was always coming. The signs were there. The economy isn’t in freefall, but it’s clearly out of breath. Whether the cut makes much difference is another matter entirely. But it shows that the Bank thinks we’ve finally moved out of the emergency inflation zone and into the slightly less awful zone.

The next meeting is on the 18th September 2025.  The individual votes.

Mortgages

If you’ve got a mortgage, especially a variable one, you’re probably thinking, “Brilliant, finally some relief.” And yes, in theory, you might see a slightly lower monthly payment. But don’t expect lenders to fall over themselves to pass it on. Most are still pricing in caution, and the fixed-rate market has already baked in most of this news weeks ago. That said, if you’re remortgaging in the next few months, this might be your first slightly less brutal offer in a while.

Savers? Sorry. Still the last in line.

Banks have been quick to cut savings rates at the whiff of change but slow to hike them when rates were going up. That trend isn’t going anywhere. So if you’ve been enjoying a half-decent return on your cash for once in your life, expect that to slowly erode as the cuts continue. Inflation might be falling, but don’t expect your savings account to keep up.