Bank of England cuts base rate to 4%: What it means for your savings and investments

The decision, made by the Bank’s Monetary Policy Committee (MPC), comes amid signs of a cooling labour market and persistent economic sluggishness. Inflation (CPI), which had fallen sharply in 2023, has recently ticked back up to 3.6% in June 2025, prompting a delicate balancing act between supporting growth and keeping price rises in check.

For savers, the rate cut is likely to bring mixed feelings. On one hand, lower interest rates typically mean reduced returns on cash savings, especially for those relying on high street savings accounts and fixed-term deposits. Banks and building societies often adjust their savings rates in line with the base rate, meaning savers may see interest earnings decline in the coming weeks and months. And with inflation still elevated, this could impact the real spending power of savings.

However, this environment also presents an opportunity to reassess savings strategies. Maintaining cash for shorter term needs remains sensible. Financial advisers can help clients to explore alternative savings opportunities, such as tax-efficient ISAs/pensions or diversified investment portfolios, to help preserve and potentially grow capital in a lower rate environment, and therefore support retaining some of the ‘real’ value of your money.

For those with variable-rate mortgages, the rate cut may lead to lower monthly repayments, increasing disposable income and potentially boosting consumer spending. This can support broader economic growth.

For investors, the rate cut could offer a more positive outlook. Lower interest rates tend to boost equity (share) markets, as borrowing becomes cheaper and corporate profits may improve. Sectors such as property, utilities, and consumer discretionary (those sensitive to borrowing costs and consumer spending) often benefit from rate reductions.

A reduction in UK rates also provides a supportive environment for both UK bonds and equities, which are typically held as part of a diversified portfolio.

At SPW, we take an active management approach, meaning our investment team monitor market conditions and adjust portfolios on behalf of our clients. This ensures that your investments remain responsive to economic shifts like today’s rate cut, helping to protect and aiming to grow your wealth in changing environments.

Interest rate cuts can bring both opportunities and challenges—it depends on how you respond. The important thing is, there are always steps you can take.

With further rate cuts possible before the end of the year, you may want to consider speaking with a financial adviser to help you navigate this evolving landscape. Whether it's reviewing cash holdings, rebalancing investment portfolios, or exploring inflation-protected assets, now could be an important time to ensure financial plans remain aligned with short, medium and long-term goals.

As always, personalised advice is key. If you're unsure how today’s rate cut affects your financial strategy, speak to an adviser to explore the best options for your circumstances.

Fees and charges may apply at SPW.

This article is for information purposes only. It is not intended as investment advice.

The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors might not get back their initial investment.

There is no guarantee by investing money it will keep level or beat inflation, particularly when inflation is high.

Any views expressed are our in-house views as at the time of publishing.