Today’s 0.25% reduction in the Base Rate and the prospect of further cuts have been welcomed by estate agents and will provide a major boost for both the property industry and the wider economy.

And it will be given an even warmer welcome by Labour as it struggles to fulfil its growth pledge.

The move comes after December’s inflation figures were lower than expected, dropping from 2.6% the previous month to 2.5%. Swap rates, which affect the cost of fixed-rate mortgages, have been falling in anticipation of the move. Five-year swaps are down from 4.12% to 3.92%, and two-year swaps from 4.26% to 4.06%.

Some big mortgage lenders, including Barclays and Coventry Building Society, have already reduced their mortgage rates. Others are now likely to follow suit, which will give buyer confidence a significant lift.

Some mortgage lenders, including Barclays and Coventry Building Society, have already reduced their mortgage rates.”

The bank’s base rate has been at 4.75% since November last year and how far and how fast it would fall has been the subject of much speculation. All eyes now, though, will be on Trump and what effect his policies may have on the rest of the world.

In his last meeting, Bank of England Governor Bailey, though, refused to speculate on the impact Trump’s tariffs would have on the UK’s economy, saying “Let’s wait and see”.

In the US, however, the Federal Reserve has indicated it will now cut rates at a slower pace than was originally intended.

Industry reaction

Verona Frankish, CEO, Yopa
“Despite the fact that interest rates haven’t fallen at the speed we expected, we’ve seen a strong and consistent level of buyer activity sweep the property market over the last year and, with a further reduction today, we expect this to remain the case as we look to the year ahead.

“Of course, mortgage rates currently remain far higher than today’s home movers have become accustomed to in recent years and so a degree of caution is advisable. However, we’re already seeing lenders react positively by reducing rates and we expect the picture to continue to improve over the course of the year where mortgage affordability is concerned.

Stephanie Daley, Director of Partnerships, Alexander Hall
“The Bank of England’s decision to reduce interest rates to 4.5% will come as a welcome one to the nation’s homebuyers, bringing a much-needed boost to property market sentiment, following the slight upward pressure on prices caused by increasing inflation levels in recent months.”

Iain McKenzie, CEO, The Guild of Property Professionals
“While inflation is still stubbornly sitting above the target, it was not enough to keep the Bank of England from cutting the rate. Today’s decision, as well as further rate cuts expected throughout 2025 should help to improve affordability, which in turn will attract a broader range of buyers to the market.

“Rates are forecast to drop to around 3.75% by the end of the year. Although much of this has already been priced into fixed mortgages, there could be some further downward shifts in these rates. This would be welcomed by those looking to move or those who will be remortgaging this year.

“While changes to Stamp Duty thresholds will have an impact on the market, it is expected that we will see a modest improvement for both the economy and the housing market in 2025. The economic backdrop has set the stage for steady market activity and moderate price growth throughout.”

Nathan Emerson, CEO, Propertymark
“Despite widespread uncertainty and the Bank of England expecting inflation rates to increase to 2.8% by the third quarter of 2025 before easing again, today’s announcement comes as welcome news for many.

“It’s now likely that mortgage borrowing takes the same path and dips slightly which will, in turn, help ease the strain on people’s finances and improve their chances of homeownership. This extra boost in affordability and confidence is needed, and we look forward to hopefully seeing new and improved mortgage products enter the market over the coming weeks.”

Marylen Edwards, Director of Mortgages, MT Finance
“The MPC’s decision to cut the base rate signals the continuation of an easing cycle, reflecting growing confidence in the Bank of England’s progress on controlling inflation while acknowledging the need to support economic growth. The timing of this cut could be particularly significant for the property market, with spring approaching – traditionally a busier period for property transactions.

“The rate reduction is likely to catalyse increased market activity, potentially offering first-time buyers a more favourable entry point. However, the market response is expected to be measured and nuanced. While the cut represents a positive shift, borrowers should temper expectations, as mortgage rates may not immediately reflect the full extent of the base rate reduction.”

Dominic Agace, CEO, Winkworth
“It’s a welcome move. We hope this will ensure the early momentum of this year continuing, where we saw the level of applicants registering 16% ahead of January last year, as people look to crack on with their lives after a year of elections.”

Jason Tebb, President, OnTheMarket
“A reduction in interest rates sends an important message to buyers and sellers, enabling them to plan ahead with more confidence. It should ease affordability and boost the housing market, as the two rate reductions in the second half of 2024 did, leading to an improvement in activity and transaction levels.

With the stamp duty concession ending in March, expected further rate reductions should give the market added momentum as the year progresses.”

Gareth Samples, CEO, The Property Franchise Group
“Today’s decision to cut the rate will be welcomed news for both mortgaged homeowners, as well as mortgage-dependent buyers who are looking to get their foot on the ladder.

“While inflation remains elevated above the target, the Bank of England is focused on the long term and stimulating economic growth. Economic growth is expected to be slightly stronger over 2025 than it was in 2024. An improved economic outlook, coupled with falling interest rates will help improve sentiment in the market and should stimulate activity to some degree.

“Further interest rate falls are expected in 2025, which should result in improved affordability, enticing a broader range of potential buyers. A greater range of active buyers should help drive the modest uplift in prices that is anticipated this year.”

Lucian Cook, Head of Residential Research, Savills
“While todays interest cut is already largely priced into the cost of fixed rate mortgages, it will make it a little easier for borrower to meet lenders affordability tests. Further rate cuts over the course of the year should widen the pool of buyers and increase their buying power allowing a gradual recovery in house prices and transaction levels.”

“Oxford Economics continues to forecast a further three cuts in 2025, bringing the base rate to 3.75% by the end of the year. On this basis we anticipate house prices to increase by 4% in 2025 or £14,500.