The Bank of England has reduced the base rate to 4.75%, marking the second rate cut this year. The decision, backed by nearly all members of the Monetary Policy Committee, comes in response to stabilising economic conditions and inflation easing to 1.7%, below the Bank’s 2.0% target. However, uncertainty surrounding the Autumn Budget leaves future rate cuts in question.
Rate cut fuels optimism in property market
Richard Donnell, Executive Director at Zoopla, welcomed the cut, saying: “The reduction in the base rate to 4.75 per cent is welcome news and has supported continued strong sales growth over 2024 versus last year.” He added that the drop in borrowing costs has contributed to lower mortgage rates, helping to drive buyer demand and boost sales as the new year approaches.
Nathan Emerson, CEO of Propertymark, echoed this sentiment, noting, “Today’s announcement will be welcome news for buyers, especially for those who may have been delaying any house move due to potential uncertainty on their overall affordability.” With increased mortgage lending and expected Stamp Duty changes from April, Emerson foresees a buoyant housing market through the winter months.
More buyers re-entering the market
Guy Gittins, CEO of Foxtons, highlighted how the rate cut could bolster buyer confidence, especially following last week’s disappointment over Stamp Duty relief. “We also tend to see a wave of new buyer interest following a cut to interest rates, as those previously priced out of the market re-enter the fray,” Gittins said, predicting a surge in activity as buyers rush to complete transactions ahead of the April Stamp Duty deadline.
Ben Thompson, Deputy CEO at Mortgage Advice Bureau, noted shifting borrower preferences due to falling rates: “Our data shows that falling rates have already impacted borrower preference. Last month, over half (54%) of borrowers opted for a five-year fixed rate, an increase of 11% versus the same period last year.” Thompson suggests the market will continue adapting to changes in mortgage rates and other economic factors.
Outlook for 2025 property market growth
Daniel Austin, CEO of ASK Partners, sees the rate cut, alongside other fiscal measures, as a signal for a stronger property market in 2025. He pointed to the Autumn Budget’s £5 billion funding for new homes and a permanent 95% loan-to-value mortgage guarantee scheme as critical factors that “aim to boost housing supply and stabilise property values.” The Affordable Homes Programme and Build-to-Rent guarantees may further support developers and ease supply constraints, making property investment an appealing alternative to gilts.
Jonathan Samuels, CEO of Octane Capital, concluded that the cut will bring relief to buyers and investors alike. “The long-term benefit of lower interest rates and the resulting increase in mortgage affordability is likely to entice more buyers,” he noted, expecting positive momentum in the property market as affordability continues to improve.
This base rate cut and additional fiscal measures signal a promising outlook for the UK housing market in 2025, as affordability improves and new initiatives support both buyers and developers. As demand grows, the property market looks set for a robust start to the new year, though future adjustments may depend on ongoing economic and policy developments.
