The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of eight to one to cut the Base Rate to 4.75%. This is the second cut of 2024 after the Bank finally moved to cut the rate to 5% from 5.25% in their August meeting. This marked the first reduction since 2020 after a cycle of hiking interest rates in order to combat inflation.
This decision comes despite recent inflationary concerns sparked by the Labour government’s budget, led by Chancellor Rachel Reeves, which is anticipated to add 0.5% to the inflation rate.
Currently, the Consumer Price Index (CPI) inflation sits at 1.7% but is expected to rise to around 2.5% as the effects of lower fuel prices fade. Domestic inflation remains under pressure, with service price inflation still at a high of 4.9%. With a tight labor market, inflationary pressures are projected to ease more gradually.
The Bank of England’s Base Rate heavily influences the rates set by banks and money lenders, so a cut can potentially have a significant effect on buy-to-let costs.
Elevated interest rates were one of the most significant issues affecting property investors in the 2024 market, so the first Base Rate reduction in August and the newly-announced cut in November were highly anticipated. Research from Rightmove suggested that many potential buyers were waiting for the first Base Rate cut before getting into property investment.
While the effects of the cut will not be felt immediately, this is good news for the market moving forward as the cost of borrowing is likely to become more affordable for investors currently in the buy-to-let sector with mortgaged properties, and those planning to enter the market with a mortgage.
Ben Thompson, Deputy CEO of Mortgage Advice Bureau, remarks, “The Bank’s decision could favour borrowers, with potential drops in swap rates and, by extension, mortgage rates. Our data has shown a trend toward five-year fixed-rate mortgages, with over half of borrowers now choosing this option — a clear shift in mindset.”
Mark Harris, CEO of SPF Private Clients, adds, “This is hugely positive news, especially for those on base-rate tracker and variable-rate mortgages. They should see reductions in monthly payments, and those savings will be welcomed by households.” For existing borrowers, Harris advises contacting a mortgage broker six to seven months before a current deal expires to lock in favorable rates, allowing adjustments if rates continue to decline.
Further, Mark Michaelides, Chief Commercial Officer of Molo, observes, “The rate cut signals positivity for the UK property market amid recent market volatility.” According to Amy Reynolds, head of sales at Antony Roberts estate agency, the previous rate reduction led to increased buyer registrations, viewings, and offers. Today’s decision could reinforce market confidence, enabling more people to make their next move.
The recent rate reduction opens more doors for first-time buyers, who might benefit from increased housing affordability. Jeremy Leaf, a north London estate agent, highlights that first-time buyers could benefit from properties vacated by investors facing higher stamp duty costs starting next April. Leaf advises that sellers keep prices competitive to leverage improved buyer power, as affordability concerns linger.
For prospective homeowners, Guy Gittins, CEO of Foxtons, notes, “With today’s rate cut and a strong housing market, buyer interest is likely to rise. We expect heightened activity as the Stamp Duty deadline nears, signaling a potentially strong end to 2024 and an optimistic start to 2025.”
This latest rate cut suggests a favourable trend for 2025, with market confidence likely to remain steady. Tim Bannister from Rightmove observes, “After the last rate cut, we saw a boost in home-moving activity, and today’s news could continue to support optimism. Even though we’re moving into a quieter market period, this should improve affordability into 2025.”
Jonathan Samuels, CEO of Octane Capital, adds, “The long-term benefits of reduced interest rates will draw in more buyers, offsetting the impact of higher stamp duty costs.”
Overall, the Bank of England’s rate cut has been widely received as a positive step for the real estate market. Whether you’re a borrower considering a mortgage, a first-time buyer, or a seller looking to capitalize on the current market, today’s news may mark the start of an active and optimistic period in the UK housing sector. As affordability continues to improve, this may be the moment to make your move.
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