In a closely watched move, the Bank of England has lowered its base interest rate to 4.25%. The decision, announced today, follows a hold in March and comes amid signs that inflation is continuing to cool, despite still sitting above the Bank’s long-term 2% target.
March’s consumer price inflation figure landed at 2.6%, down from previous highs, giving the Monetary Policy Committee (MPC) the confidence to begin cautiously loosening monetary policy. Seven of the nine committee members voted in favour of the cut, indicating growing consensus that the worst of the inflationary pressure may now be behind the UK economy.
The Industry Reacts
Richard Donnell, Executive Director at Zoopla, comments: “Today’s base rate cut is welcome news for people looking to sell and buy homes in 2025. It will provide a boost to market sentiment and filter slowly into lower mortgage rates as the cost of fixed-rate mortgages already reflects future cuts in the base rate. This, alongside reforms to mortgage regulations announced recently, will help boost buying power. This is important at a time when there is a large number of homes for sale across the UK – the average agent has 34 homes for sale. Improved buyer confidence will support sales and help more people realise their moving ambitions in the year ahead.”
Nathan Emerson, CEO of Propertymark, comments: “Today’s news will no doubt be extremely welcome for many, especially given current economic uncertainties. International bodies have recently stated they expect interest rates to fall in the UK as the year progresses. Overall, we hope to see interest rates further continue their downward trajectory over the course of 2025.
The UK housing market has recently been buoyed by Stamp Duty threshold changes leading up to the start of April, and with the busier spring and summer months now here, this base rate reduction should attract even more buyers and sellers to the market and provide greater affordability.
Housing is a central part of the UK economy, and we now hope to see considering the UK Government and the devolved administrations have shown a keen focus on housing growth, is that they look ahead to achieving their individual housebuilding targets to meet growing demand.”
Bradley Post, MD of RIFT, comments: “A second consecutive cut to the base rate already this year will come as welcome news if you’re a borrower, particularly for those households who are continuing to feel the pinch where the cost of living is concerned.
Of course, whilst it may mean that we’re paying less when it comes to our mortgages, or other finance agreements, it does mean that the interest accrued on our savings pots will weaken and this won’t be as warmly welcomed by those trying to form a nest egg.”
Jean Jameson, Chief Sales Officer for Foxtons, comments: “Whilst a cut was widely expected today it will still fuel the property market momentum that has been building over much of the last year and, with interest rates now trending downwards, we can expect to see homebuyers acting with an even greater level of confidence over the coming months.
Those coming to the end of a fixed term are also set to benefit and we’ve seen rates already start to fall in the lead up to today’s decision, with many lenders reintroducing sub four percent mortgage products, driven by increased mortgage provider competition.
With a greater degree of mortgage affordability fueling the market, it’s looking to be a very positive year and the expectation is that house prices will continue to hold firm on their current upward trajectory.”
CEO of specialist lender Octane Capital, Jonathan Samuels, comments: “Today’s rate cut was largely expected and we’ve already seen swap rates plummet in recent weeks in anticipation of the Bank of England’s announcement today.
This will come as welcome news and the general expectation is that today’s cut is first of several to come over the course of the year.
There are two primary reasons that interest rates are expected to be lowered further and both can be traced back to Trump Tariffs.
First, lower interest rates are desperately needed to stimulate the UK economy into growth territory. On 26th March the Office for Budget Responsibility (OBR) halved its UK GDP growth forecast to just 1% this year largely a result of global trade pressure from Trump’s Tariffs.
Second, Trump’s 145% tariffs on China make it very likely that cheap Chinese goods destined for the US are re-routed to other countries like the UK. This so-called dumping of cheap Chinese products will lower inflation which gives the Bank of England the much needed flexibility to lower interest rates.
If the good news is lower interest rates, the bad news is building costs are going up 17% over the next 5 years according to BCIS. However, so far this hasn’t been driven by material cost increases as in previous years, rather labour costs going up as the National Living Wage and National Insurance (Employer NICs) take effect.”
Robert Sadler, Vice President of Real Estate at Excellion Capital, comments: “We’ve been seeing swap rates get progressively lower in recent weeks which means that this new base rate cut comes as no surprise. It is certainly welcome news for real estate investors who have been concerned about high interest rates for some time now, but the sense of relief will go beyond investment and out into the wider market and economy, going some way to undoing the damage to confidence that has thus far been caused by the Labour government’s policies.”
Sarah Thompson, Managing Director at Mortgage Scout, comments: “The Bank of England’s decision to cut the base rate today is a timely and much-needed boost for borrowers. After a prolonged period of high interest rates, this shift should help ease affordability pressures and unlock more movement from first-time buyers and homeowners. We’re already seeing signs of renewed confidence with searches for remortgaging up by 34% in Q1, according to Legal & General, as borrowers look ahead to what rates might be when their current deals come to an end. At the same time, several lenders have recently increased their income multiples, further improving affordability and opening up more options for borrowers.
“qually significant is the FCA’s announcement yesterday, following its open letter to the government in January calling for a more growth-focused regulatory approach. The FCA has now confirmed plans to launch a formal consultation in June, aimed at making it ‘easier, faster, and cheaper for borrowers’ to make changes to their mortgage. This is a vital step towards a more flexible and responsive lending environment. Together, these developments send a clear message: the market is beginning to shift back in favour of borrowers.”
Paresh Raja, CEO of Market Financial Solutions, comments: “The markets inked in this base rate cut several weeks ago, with many lenders having already dropped rates over the past fortnight. As a result, today’s decision might be met with a somewhat muted response. But we should be careful not to take another 0.25% reduction for granted; rates are trending in the right direction and borrowers will welcome every cut.
“With more rate cuts expected in the months to come, some property buyers and investors might decide to bide their time. But there’s an overwhelming sense that demand is returning to the market thanks to the increasingly favourable interest rate environment. Coupled with the usual seasonal trends we see, we’re expecting the summer months to be a busy period, and the focus from lenders has to be on fast, decisive action – giving brokers and borrowers clarity on product availability and rates, along with prompt decisions on applications, will be crucial in allowing the market to flourish.”
Tim Parkes, CEO of RAW Capital Partners, comments: “The only real question today was seemingly whether the Bank of England would be so bold as to vote for a 0.50% reduction. For now, the Bank is clearly sticking to a conservative strategy and, while there is pressure for more significant cuts, the broader expectation is still that there could be as many as four more base rate cuts from the Bank’s five remaining meetings this year.
We are on the right path, even if the speed of travel is not fast enough for some. The base rate is now a full percentage point lower than the recent 5.25% peak we saw for much of 2023 and 2024. If indeed the base rate does continue to fall to 3.5% or even 3.25% by the end of this year, it will likely encourage many more property buyers and investors to enter the UK property market. Transactional activity and house prices could both see an uplift as a result, particularly as mortgage lenders reprice their products to reflect the medium-term predictions of a steadily falling base rate.”
Alpa Bhakta, CEO of Butterfield Mortgages Limited, comments: “The Bank of England’s second rate cut of the year comes at an ideal time. Activity levels in the prime central London (PCL) market improved steadily throughout Q1, and with borrowing costs remaining the most significant driver of sales, today’s reduction should further reinforce the momentum and confidence permeating the property sector. Continued support from lenders for borrowers and brokers alike will be key in ensuring the market fully capitalises on a more supportive monetary environment in the coming weeks.”
Kevin Shaw, National Sales Managing Director, LRG, comments: “Today’s much-anticipated reduction in interest rates is a welcome shot in the arm for the housing market and well timed given the Stamp Duty changes at the end of March.
At LRG we have seen a strong start to 2025 in all regions with sales up nearly 10%. Factoring in a lower cost of borrowing will, we anticipate, give fresh momentum to the market as we move towards the summer months.
The MPC, given the instability in the global economy, has appreciated the need to react quickly and there is now an expectation that interest rates will fall to around 3.5% by the end of this year which will further boost both confidence and sentiment.”
