Landlords and property investors across the UK are bracing for a potential turnaround in fortunes as the Bank of England is widely expected to lower interest rates on 8 May 2025 – the first reduction in years. With analysts predicting up to three further cuts throughout the year, this shift could ease financial pressures that have mounted during the costliest borrowing period in over a decade. The move, aimed at jump-starting a sluggish economy and reviving consumer confidence, could deliver welcome relief for landlords juggling rising mortgage repayments, dwindling rental yields, and tough affordability tests.
Confidence builds for may rate cut
Market analysts have dramatically revised their expectations, now placing a 95% chance on the Bank of England cutting its base rate from 4.5% to 4.25% at the next monetary policy meeting. This sharp increase in confidence follows a string of weakening economic indicators and heightened global instability – notably trade tensions involving the United States. “The turmoil Trump has unleashed on the world has increased the odds of a May interest rate cut dramatically,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “Financial markets are currently pricing in a 95% chance of a reduction on the 8th, whereas before Liberation Day it was looking more like 50/50.”
Streeter pointed out that while UK inflation remains above target, broader deflationary pressures – especially due to cheaper imports from Asia – are now more pressing. “A flagging economy rather than stubborn inflation is more of a bugbear to beat right now,” she said. For landlords, especially those with variable or soon-to-expire fixed-rate mortgages, a cut in borrowing costs could significantly ease monthly repayments and improve profit margins.
The expected trajectory for the rest of 2025 includes as many as three additional quarter-point cuts, possibly bringing the base rate down to 3.5% by year-end. This would mark a significant reversal after fifteen consecutive hikes that have left many landlords reeling. The change of tack could make refinancing more manageable, reinvigorate property investments, and allow landlords to take a breath after a turbulent two years.
Savings rates start to slip as cuts loom
While lower interest rates may help reduce borrowing costs, they’re also starting to chip away at the generous savings returns many landlords have enjoyed recently. “As competition heated up over tax year end, the savings deals on offer remained relatively elevated, particularly in the easy access cash ISA market. But now that the market is expecting a rate cut in May, and more later in the year, we’re seeing those rates start to drop,” said Mark Hicks, head of Active Savings at Hargreaves Lansdown.
That means time may be running out for landlords holding significant cash reserves to secure top rates. Hicks added, “Given that markets now expect roughly three more rate cuts for the remainder of the year, fixed rate deals above 4.5% may not be around for much longer.” He advised landlords to consider tying up spare funds in fixed-term accounts while competitive rates are still on offer.
On the pension front, annuity buyers may also be affected. Annuities have made a comeback in recent years as interest rates lifted payouts, but with the tide turning, returns may start to soften. “Annuities have enjoyed a huge revival… The prospect of cuts on the horizon means that we may well see incomes start to fall back,” said Helen Morrissey, head of retirement analysis at Hargreaves Lansdown. That said, Morrissey urged calm, adding, “We are a long way away from the mega low interest rates that we had in recent years.”
She recommended a staggered approach for those near or in retirement. “You also don’t have to lock all your pension into an annuity at once. Instead, you can annuitise in stages… You can then lock into higher annuity rates as you age and potentially secure an even higher income through an enhanced annuity.”
Mortgage rates soften, but pain lingers for recent refinancers
The most immediate and personal impact of a rate cut will be felt in the mortgage market. For many landlords, particularly those with buy-to-let properties on tracker or variable rates, the change would bring relief after months of tightening margins. “Mortgage rates below 4% are spreading, as the market is pricing in a first cut in May, and then more cuts as we go through 2025,” said Sarah Coles, head of personal finance at Hargreaves Lansdown (pictured). “The average two-year fix is now 5.22%, down from 5.32% at the start of the month.”
For landlords whose fixed-rate deals are coming to an end, the timing could be critical. Lower rates could make refinancing more affordable, reduce stress test thresholds, and even revive expansion plans that were shelved due to high borrowing costs. However, Coles was quick to caution that not everyone will feel immediate benefits. “Unfortunately, for those remortgaging from back when rates were much lower, there’s still some pain to come,” she said.
According to the firm’s data, borrowers who have refinanced since late 2022 are spending on average £157 more per month than those who haven’t yet faced the reset. That gap underscores just how far rates have risen – and how urgently a reversal is needed for cash-strapped landlords trying to keep their operations viable.
Sarah, a landlord from Blackpool with six properties, recently saw her mortgage payments jump by £900 a month after remortgaging at 5.3%. “It was a massive shock,” she said. “We had to dip into our emergency fund and postpone the kitchen upgrade in one of the HMOs. A cut won’t undo the damage, but it gives us a bit of breathing space.”
Cautious optimism for property investors
Though no one is celebrating just yet, the anticipated shift in interest rates has lifted spirits in the landlord community. With house prices showing early signs of stabilising and mortgage affordability potentially improving, the property sector could be on the cusp of renewed momentum. Falling savings rates might also push more investors back toward bricks and mortar, especially those comparing shrinking ISA returns to solid, long-term rental yields.
Still, questions remain. Will rate cuts be enough to counteract new tax rules and rising regulatory costs? Could global shocks derail the Bank of England’s plans? And will the relief be enough to stop the flow of landlords exiting the market altogether?
One thing’s for sure: after two years of feeling like the punching bag of monetary policy, landlords may finally be about to catch a break. While no one is predicting a return to ultra-cheap borrowing, even a modest softening in rates could mark a vital turning point – giving landlords the headroom to regroup, reinvest, and rebuild.
Whether you’re a small-scale landlord with one flat in Hull or managing a portfolio across London and the Midlands, the message is clear: stay alert, review your financing now, and act swiftly to lock in opportunities before the winds change again.
