REACTION: Bank of England cuts base rate by 0.25%

In a move that has been welcomed by the property industry, the Bank of England’s Monetary Policy Committee has voted by a substantial majority to reduce the Bank Rate from 5% to 4.75%.

With inflation running at 1.7%, well below the Bank’s 2% target at 1.7%, and wage growth at a 2-year low, the reduction was widely expected by the money markets.

It means lenders have mostly priced in the cut into their mortgage rates but the more than one million borrowers on tracker and variable deals will see more immediate falls in their monthly bills.

The reduction should also give buyers a significant confidence boost as, together with the 0.25% fall in August, it points to an ongoing trend.

The Committee’s briefing papers with the announcement add: “There has been continued progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.

“Based on the evolving evidence, a gradual approach to removing policy restraint remains appropriate. Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.”

Industry reaction

Nathan Emerson, CEO of Propertymark, says: “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.

It’s highly likely we may see buoyant activity in the market across the winter months.”

“With the Bank of England’s most recent Money and Credit Report revealing net mortgage lending has further increased by 0.9 per cent in September, up on the 0.7 per cent seen in August, coupled with proposed changes to Stamp Duty thresholds from next April, it’s highly likely we may see buoyant activity in the market across the winter months.”

Dominic Agace, chief executive of leading estate agents Winkworth also welcomes the move, saying: “After a small wobble around the Budget, (it) provides reassurance that the property market will continue on the path to recovery.

“We have seen applicants register to buy 12% ahead of last year and 9% ahead of the 3-year average, down from 18% and 11% in the weeks before.

“We would expect this positive and anticipated step to reverse this slight drop.”

Nicky Stevenson, Managing Director at national estate agent group Fine & Country says the move will add momentum to the market, she adds a note of caution, commenting: “The full impact of the Autumn Budget on long-term interest rates may take time to unfold.”

“And with the Government’s borrowing plans pushing up yields, the base rate may not come down as quickly as has been anticipated.”

Richard Donnell, Executive Director at Zoopla says: “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.

“The decline in the base rate is already being factored into lower mortgage rates which have reached a two year low over the autumn. Lower borrowing costs are expected to support buyer demand and sales into 2025.”

Jeremy Leaf, north London estate agent, says: “Of all the factors influencing home-buying decisions, economic prospects and direction of travel for interest rates in particular have most impact.

“Today’s reduction will certainly give a kick to those sitting on the fence who are undecided about whether to stick or twist, coming on top of other recent positive housing market data.

“There’s more choice of stock now than a few months ago, so sellers need to remain competitive if wanting to take advantage of inevitable improved  buying power as longer-term affordability concerns persist too.

“First-time buyers especially are looking to gain not just properties from investors withdrawing from transactions due to their higher stamp duty liability announced in the Budget but their own obligation to pay more of the tax from next April.”

Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “It’s a significant week for the property market with the Budget, the US election, and now the Bank of England’s interest rate decision.

“The August rate reduction boosted buyer confidence, leading to an uptick in applicant registrations, viewings, and offers, contributing positively to our fourth quarter revenue. A further rate drop would likely encourage more vendors to sell and buy, helping to ‘get people off the fence.’ With likely further reductions throughout next year, this should provide stability, giving people the confidence to plan, which is essential for maintaining market momentum.

“With the Budget behind us, we now have greater certainty. Homeowners without second homes may feel encouraged by a rate drop, though those with holiday homes or rental properties may wait for further rate cuts before re-entering the market.

“We are cautiously optimistic but concerned about the future stamp duty rate change for first-time buyers. Do they realise how long it takes to complete a purchase? If the mortgage market reacts positively to today’s reduction, first-time buyers should seriously consider making their move to agree a purchase before Christmas, as delays could prove costly.”

Nick Leeming, Chairman of Jackson-Stops:  “A second base rate cut this year is welcome news. While a 0.25% cut is a small milestone in the march back to a mortgage-friendly borrowing environment, it signals confidence from the Bank of England which will reassure buyers and encourage them to continue their property search or purchase.

“Following the initial market volatility from the Chancellor’s Autumn Budget announcements and the loosening of fiscal rules, the Bank’s actions show it is taking a long-term view of the UK’s economic outlook with improvements anticipated on the horizon.

“With inflation falling faster than expected, there’s confidence to proceed with rate cuts. Economists predict a quarterly rate-cutting rhythm during 2025, which should translate into further reassurance for homebuyers looking to flex their borrowing power to upsize or relocate.”