Mortgage brokers are now confident the Bank of England will cut interest rates next month, following disappointing GDP figures for April and May. The UK economy contracted by 0.1% in May, after shrinking the previous month, prompting widespread expectations of a further reduction in the base rate on 7 August.
The current base rate sits at 4.25%, following three cuts earlier this year – the most recent in May, when the rate was lowered from 4.5%. While the Bank’s Monetary Policy Committee (MPC) voted 6–3 to hold steady in June, mortgage professionals say the latest data makes further hesitation unlikely.
This could be especially welcome news for landlords grappling with higher borrowing costs, particularly those on variable-rate or recently remortgaged buy-to-let deals.
Market downturn drives policy shift
The Office for National Statistics (ONS) surprised analysts this week with data showing back-to-back economic contraction. Hopes of modest growth were dashed, and economists now say policymakers will be forced to act.
Rakesh Dua, CEO at DUA Accountancy & Business Consultancy, said: “The Bank of England is now far more likely to cut rates next month in an effort to address the downturn and boost sentiment among borrowers and businesses alike. Mortgage costs will come down and they need to, given the pressure households are under.”
For landlords, particularly those operating in regions where yields have been squeezed by rising costs and tax changes, a rate reduction could help restore some breathing room. Many have warned that unless financing becomes more manageable, more rental homes could disappear from the market entirely.
“As certain as death and taxes”
A growing number of financial experts believe a cut is no longer just probable – it’s all but guaranteed. David Stirling, Director at Mint Mortgages & Protection, declared: “A rate cut by the Bank of England next month looks as certain as death and taxes – but much more welcome.”
He continued: “All current data looks to be forcing Threadneedle Street in one direction. This will drive further competition between lenders, which can only be sunny news for borrowers.”
Indeed, Adam Stiles, Managing Director of Helix Financial Partners, echoed this sentiment. “May’s bleak economic data could be good news for borrowers,” he said. “The odds of a rate cut will be slashed on the back of this news.”
With lenders already beginning to tweak products in anticipation of further reductions, property investors and landlords may find themselves in a more favourable position when securing or renewing mortgage finance in the weeks ahead.
Landlords cautiously optimistic as costs ease
Buy-to-let investor Harjit Singh, who recently refinanced two properties in Birmingham, said the rising cost of borrowing had “taken a serious toll” on cashflow. “I had to raise rent just to stay afloat – not because I wanted to, but because my mortgage repayments jumped by £420 a month,” he said.
“If rates come down, it gives us a bit more flexibility. Maybe then people will stop accusing landlords of being greedy and understand what’s really driving rents up.”
While many in the sector remain cautious, the possibility of cheaper finance could stem the tide of landlords exiting the market. With inflation slowing and economic performance faltering, the Bank may finally be shifting to a more supportive stance.
