Bank of England rate cut won’t move the needle on 36% APRs for 36 million UK credit card holders

The Bank of England is expected to cut interest rates this Thursday, lowering the base rate from 4.25% to 4.0%, which will be the first drop since March 2023.

This is great news for mortgage holders and banks. But if you’re one of the 36 million Brits with a credit card, Updraft warns to not get your hopes up as your APR is unlikely to fall.

In the past month, searches for “base rate meaning” are up 213% and “bank of england meaning” are up 188%. At the same time, “how to get a lower interest rate on credit card” is up 120%.

Updraft is warning that millions of consumers may misunderstand what a base rate cut means, and urges people to take control now during this turning point.

Why are we talking about credit cards if a rate cut won’t affect them?

Aseem Munshi, Our founder at Updraft, experts in helping people pay off credit card debt and build confidence with their consumer credit, comments:

“That’s the exact point – a rate cut won’t affect credit interest, and people need to understand why as online searches are showing worry and confusion.

“This week’s Bank of England rate cut will likely ease borrowing costs for mortgages, loans, and banks, but credit cards are different. Their interest rates aren’t automatically tied to the base rate.

“While the Bank of England’s base rate is expected to fall to 4.0%, the average credit card APR is now 36.03%, up 3.68 percentage points from a year ago. Credit card APRs are nearly nine times higher than the base rate, and have risen even as base rates held steady.

“We’ve seen that many people assume that when the Bank of England cuts rates, their borrowing costs fall too. But for credit cards, the reality is the opposite, as interest rates have continuously kept rising and this cut won’t change that.”

Credit card lenders can raise rates but don’t commit to lowering them

Updraft highlights that a look at the fine print from lenders reveals the catch. On its credit card FAQs, one lender explains:

“Let’s say the Bank of England base rate goes up by 0.25%. You’ll then pay an extra 21p a month more in interest for every £1,000 of your balance.”

But when the base rate may change significantly?

“We will decide whether it is reasonable to replace it with another rate or make other changes to how we calculate interest.”

Munshi adds: “When base rates rise, borrowers pay more. But when they fall? Lenders choose if it’s ‘reasonable’ to pass on the savings and often, this is unlikely. This asymmetry means credit card users lose out and it’s why we’re warning people not to wait for relief that may not come.”

But this could still be a turning point, if people act in 5 ways

While credit card interest rates themselves aren’t tied directly to the Bank of England base rate, meaning your credit card APR likely won’t drop, the rate cut can still have important ripple effects across the borrowing landscape, as Munshi explains:

1. Easing cost of other loans:
   “The base rate cut usually lowers borrowing costs for personal loans, mortgages, and refinancing products. That means lenders might offer better rates on these alternatives to credit cards.”
2. Increased competition among lenders:
   “Other types of borrowing like personal loans, mortgages, and refinancing products are much more sensitive to base rate changes. When base rates fall, lenders often compete to attract customers with more attractive offers like lower interest rates, 0% balance transfer deals, or improved loan terms.”
3. Opportunity to refinance or consolidate debt:
   “If you have high-interest credit card debt, a shift in rates can be a useful moment to step back and reassess whether your current borrowing still works for you. Some people explore structured alternatives, like fixed-term personal loans, which may offer more predictable payments. But it’s not always the cheapest route, and whether it’s right for you will depend on the overall cost and how it fits your circumstances.”
4. Potential for more rate cuts:
   “Since this is the first cut since 2023, it could signal more changes ahead, but it’s just one factor that affects borrowing. Some lenders may adjust their pricing, while others might tighten their criteria. If you’re thinking about your next steps, comparing the full cost and terms of any new credit is key.”
5. Improved affordability & qualification:
   “Lower base rates can sometimes influence how lenders assess new borrowing, whether that’s around pricing or how much they’re willing to offer.
   A shift in base rate won’t always change your options overnight, but it may influence how some lenders make decisions. If you’ve struggled to qualify before, this could be a moment to take stock, though affordability still comes first.”

Assem Munshi concludes: “This rate cut won’t reduce credit card APRs, but it might be a good moment to rethink how your borrowing is structured. Many people find themselves stuck making minimum payments and feeling trapped in debt that doesn’t move.

“At Updraft, we often see customers using these shifts as a nudge to explore more structured options – whether that’s consolidating balances, planning repayments, or just getting clearer on where their money’s going. What works will always depend on individual circumstances and what’s realistically affordable.”

For more tools and information on managing borrowing, please visit updraft.com