The Bank of England has cut interest rates from 5% to 4.75%, in the latest meeting of its monetary policy committee (MPC), to the relief of many in the industry.
With inflation currently 1.7%, below the bank’s 2% target, the MPC voted eight to one in favour of cutting rates. This is the second base rate cut since August 2024 when the MPC voted to reduce rates from 5.25% to 5%. The MPC was split 5-4 at that point.
Paresh Raja, CEO of Market Financial Solutions, said the rate cut will be welcome news to many in property: “The market will breathe a sigh of relief.
“We anticipate that the market will gain momentum in the coming weeks as it adjusts to a more accommodating – though still challenging – monetary environment.”
Likewise, Mark Harris, CEO at SPF Private Clients, called the news “hugely positive” for borrowers but said vigilance would be required as to where rates go in the future.
“We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months, bringing further relief for homeowners and home ownership within the grasp of first-time buyers,” said Mark.
“However, what cannot be guaranteed is where rates end up, nor the pace it takes to get there. If you cannot afford to be wrong – that is, if rates were to rise you would struggle to pay the mortgage – then a fixed-rate mortgage usually makes sense.”
Amy Reynolds, head of sales at estate agency Antony Roberts, also expects the news to boost buyer sentiment but says challenges still remain for BTL borrowers.
“Homeowners without second homes may feel encouraged by a rate drop, though those with holiday homes or rental properties may wait for further rate cuts before re-entering the market,” said Amy, who is also cautiously optimistic about recent stamp duty changes and the attractiveness for new buyers.
“Do they realise how long it takes to complete a purchase?” she added. “If the mortgage market reacts positively to today’s reduction, first-time buyers should seriously consider making their move to agree to a purchase before Christmas, as delays could prove costly.”
From a development angle, this will support those looking to boost housing stock according to Neal Moy, managing director at Paragon Development Finance.
“This will be a positive step for our house builder clients, and may lead to an increase in demand for homes built as mortgages become cheaper, so we would expect to see an increase in enquiries for developers in the coming months,” said Neal.
“While it is positive, we must remember that the housing market is still stabilising after a turbulent few years, but the second reduction in base rate in just a few months is a good sign.”
Tim Parkes, CEO at Raw Capital Partners, is not surprised and points to MPC members likely being relieved by a lack of fallout from the recent budget speech and the US presidential election.
With the rate cut a move to a more “accommodative monetary policy”, Tim says the “bigger picture is encouraging” as a result.
“Any rate reduction is positive news for the lending and property markets,” he said. “Although rates may never return to the historic lows seen between 2008 and 2021, they are trending in a favourable direction, making it easier for homeowners and investors to manage both current and future loans.
“Looking ahead to 2025, we expect specialist finance demand to grow, provided that brokers and lenders can support borrowers with the financial products and expertise they will need to navigate the changing political and economic landscapes with confidence.”
