In a much-anticipated move, the Bank of England has announced a 0.25% cut to its base interest rate, reducing it from 4.5% to 4.25%. This reduction, the second rate cut of 2025, comes as a welcome boost to the UK property market, providing much-needed support as we move towards the summer months. It also signals the possibility of further cuts throughout the year, which could have a significant impact on both buyers and sellers alike.
Why was this cut expected?
With inflation currently standing at 2.6%, above the Bank’s target of 2%, the decision to reduce the interest rate is a response to the ongoing need to stimulate economic growth. While inflation remains persistent, the Bank of England’s Monetary Policy Committee (MPC) voted narrowly (5-4) in favour of the reduction, citing the importance of supporting the housing market, which remains a crucial pillar of the UK economy.
At the heart of the decision is the desire to reduce borrowing costs and improve affordability for buyers, especially as the property market faces global economic uncertainties. The latest rate cut is expected to have a ripple effect across the housing market, especially as lenders have already begun reducing mortgage rates in anticipation of these cuts.
How will this impact the property market?
The reduction in interest rates is expected to reignite buyer confidence, particularly among first-time buyers who may have been priced out due to higher borrowing costs in recent months. Many lenders are already offering sub-4% mortgage rates, and with further cuts anticipated, mortgage affordability should improve for many, creating a more conducive environment for property transactions.
Experts in the property industry are welcoming this rate cut, as it is likely to have a positive effect on both buyer activity and market sentiment. Kevin Shaw, National Sales MD at LRG, notes that the cut is well-timed, particularly with the recent changes to Stamp Duty, which have already sparked a significant uptick in property sales. Shaw predicts that the lower cost of borrowing will provide fresh momentum to the market as we enter the busy summer months.
Tom Bill, Head of UK Residential Research at Knight Frank, echoes this sentiment, adding that as more mortgage rates fall below 4%, prices are expected to remain stable, supported by strong buyer demand. However, he does warn that persistent inflationary pressures could reverse some of these gains if interest rates need to rise again in the future.
What does the future hold?
Looking ahead, many industry experts predict that the Bank of England will continue to cut rates in the coming months, potentially reaching a target of 3.5% by the end of 2025. This will likely support property demand, particularly in a market where housing supply is limited. Increased affordability and stronger buying power will be key factors in sustaining momentum throughout the year.
Nathan Emerson, CEO at Propertymark, states that this reduction is a much-needed respite for many buyers, especially after the challenges posed by higher borrowing costs. With the busier spring and summer months now underway, he believes the rate cut will encourage more buyers and sellers to engage in the market.
What should homebuyers and sellers do now?
For potential homebuyers, now is a great time to act. With rates expected to continue to fall, buyers can lock in lower mortgage deals, which will significantly improve their purchasing power. First-time buyers, in particular, should take advantage of this opportunity before rates climb back up.
For sellers, the property market remains competitive, and with increased demand expected as interest rates drop, now may be an ideal time to list a property. As affordability improves for buyers, homes are likely to sell faster, leading to a more dynamic and active market.
To summarise:
The Bank of England’s decision to cut the base rate to 4.25% is a significant development that will undoubtedly have a positive impact on the property market. Whether you’re a buyer, seller, or investor, this shift presents new opportunities to make the most of current market conditions. At GKR, we understand the importance of staying informed about market changes and are committed to helping you navigate these shifting dynamics to make the best decisions for your property journey.
If you're looking to take advantage of these market shifts or need guidance on buying or selling your property, our team at GKR is here to assist. Get in touch with us today to learn how we can help you make the most of the current property landscape.
