The Bank of England’s Monetary Policy Committee (MPC) has voted to reduce the Bank Base Rate by 0.25%, bringing it down from 4.75% to 4.5%. This marks the first rate cut of 2025 and the lowest level since June 2023. The decision follows an unexpected drop in inflation to 2.5% last month, fuelling hopes of further rate reductions in the coming months.
While seven members of the MPC voted in favour of the 0.25% cut, two members pushed for a more aggressive reduction of 0.5%, suggesting that additional cuts could be on the horizon.
Industry experts have responded positively to the decision, viewing it as a step in the right direction for homebuyers, investors, and the wider property market.
Nick Leeming, Chairman of Jackson-Stops, stated:
“While this decision may not have been a surprise, it will certainly be welcomed. With expectations of further incremental cuts this year, the Bank of England is showing confidence in the wider market. Inflation is much lower than a year ago, and the tide has turned on interest rates, which will improve affordability in the mid to long term.”
Similarly, Jeremy Leaf, former RICS residential chairman, highlighted that while the cut may not have an immediate impact, confidence remains key:
“Confidence is vital to improving activity, not just in buying and selling homes but across the economy as a whole. Even a small reduction is welcome. Demand has picked up since the start of the year, and while transactions may be moving slowly, we’re not seeing widespread renegotiations or failed sales.”
While lower interest rates are generally positive for borrowers, mortgage rates may take time to adjust. Richard Donnell, Executive Director of Zoopla, explained:
“Today’s cut to the base rate will provide a boost to market sentiment, but not necessarily a boost to buying power. The average 5-year fixed mortgage at 75% LTV is currently 4.4%, while a 2-year fix is 4.6%.
However, lenders have already begun responding. CEO of Octane Capital, Jonathan Samuels, noted:
“Many lenders have already started reducing mortgage rates in anticipation of this cut, which is a good sign for affordability.”
Despite the positive outlook, some investors remain cautious. Robert Sadler, Vice President of Real Estate at Excellion Capital, expressed concerns about economic uncertainty:
“While this rate reduction is a step in the right direction, confidence among investors and lenders remains fragile. We need stronger economic signals to restore market optimism fully.”
As the year progresses, further rate cuts could provide additional relief for homebuyers and investors. If you’re considering purchasing property, now is a great time to assess your options, as lenders continue to adjust their mortgage products.
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