The Bank of England has voted to decrease the base rate by 0.25%, lowering from 5.00% to 4.75%.
The Monetary Policy Committee (MPC) voted by a majority of 8-1 to reduce the rate.
This move followed the MPC’s decision to hold the rate at 5.00% in September, and marked the first time the rate has fallen below 5.00% since the bank chose to raise interest rates above the 5.00% threshold in June 2023.
The decision aimed to support economic growth amid signs of slowing inflation, which recently eased below the BoE’s target of 2% to 1.7%, down from a peak of 11.1% in October 2022.
Reaction:
Nicholas Mendes, mortgage technical manager and head of marketing at John Charcol:
“Today’s decision to reduce the Bank Rate by 0.25% came as anticipated, despite last week’s eventful Budget, which has shifted forecasts for monetary policy as we head into 2025.
“This is the second rate cut in the UK’s loosening cycle, following similar moves by other European central banks, including the ECB, SNB, and Sweden’s Riksbank, which have already made multiple reductions this year.
“Labour’s Budget last Wednesday introduced various tax increases, but bond markets reacted negatively when Government debt levels were revealed the next day.
“Since October 30th, gilt yields have risen sharply, increasing UK Government borrowing costs.
“Markets are now concerned that increased government spending could add inflationary pressure, potentially prompting the Bank of England to slow the pace of future rate cuts.
“In September, the Bank suggested a ‘gradual approach’ to policy easing.
“Since then, we’ve seen both the 30th October Budget and a lower-than-expected inflation reading for September, reported on 16th October.
“That October release showed the Consumer Prices Index (CPI) rising 1.7% year-on-year, below the 1.9% forecast.
“The next CPI data, due on 20th November, is expected to show a 2.2% increase.
“The Budget’s economic forecasts from the Office for Budget Responsibility stood out for inflation, with the 2025 CPI forecast now at 2.6%, up from 1.5% just eight months ago.
“Inflation is expected to remain above target through 2026–2028, driven by wage growth and fiscal policy.
“Though the Bank of England operates independently from the Government, fiscal plans will inevitably influence its outlook on growth and inflation.
“Today’s rate decision comes with a quarterly monetary policy report, providing deeper insights into how the Government’s fiscal stance may shape the economy.”
Ryan Davies, strategy director at Bluestone Mortgages:
“Following the uncertainty surrounding last week’s Autumn Budget, today’s decision to drop rates to 4.75% will be welcome news to customers both on, and looking to get onto, the housing ladder.
“However, with the recent volatility in swaps rates we are likely to see lenders pricing move around in the coming weeks to account for this.
“For those looking to get onto or up the property ladder in the current environment, speaking with a mortgage broker is a sensible first step.
“These professionals can point them in the right direction and help them plan ahead to find the best deal available to them.”
Ben Allkins, head of mortgages and protection at Just Mortgages:
“Even in the wake of the recent Budget, market forecasts have remained really optimistic about the prospects of a subsequent cut to the base rate – especially as inflation has continued to improve.
“It has long been on the cards and is hugely welcome as potential buyers snap out of their pre-Budget holding patterns and get their moving plans back on track.
“The hope is that positive movement on the base rate will rub off on swap rates and will give lenders the platform to review their pricing.
“Ultimately though, lenders do need to lend and today’s decision will certainly influence their decision making as they look ahead to their end-of-year lending targets.
“While it is easy for borrowers and brokers to get bogged down in elements of the Budget, this is a really positive headline that we need to be sharing with our customers.
“Brokers play such a critical role in educating clients about changes in the market and the many opportunities still available.
“If we are proactive, we can be that driving force in reigniting consumer confidence and ensuring a positive end to the year.”
Rob Clifford, chief executive of Stonebridge:
“As expected, rate setters have opted for a fresh cut.
“This comes despite last week’s Budget, which the Office for Budget Responsibility (OBR) cautioned would raise inflation and potentially rates.
“It is also despite fears the victory of Trump in the US Presidential Election could lead to renewed global inflationary pressures, thanks to the President-elect’s views on tax cuts and import tariff hikes.
“Any arrival of tax cuts and trade tariffs in the US economy will have potentially profound implications for markets, and this will feed directly into the Bank’s future thinking as it looks to continue curbing any renewal of inflation.
“However, with inflation currently below its 2% target, the MPC has felt comfortable providing what will be welcome news for mortgage borrowers.
“As ever, regardless of market conditions, mortgage hunters should seek professional advice and benefit from the expertise of a broker.”
Richard Pike, chief sales and marketing officer at Phoebus Software:
“Following the UK Budget and the US Election result, overall, the markets are reacting positively.
“Coupled with lower-than-expected inflation figures last month, today’s rate cut is not unexpected and means we can look forward to a strong finish to the year.
“We shouldn’t expect a massive change in fixed mortgage rates than those already planned by lenders, and with inflation looking like it will rise again moving into 2025, another cut in December is looking more unlikely.
“With such a constantly evolving economic picture, consumers may continue to struggle on product choice, but with more choice continually coming to market this shouldn’t affect gross mortgage lending figures moving forward.”
Russell Gous, editor-in-chief of TopMoneyCompare:
“The Bank of England’s decision to reduce the base rate to 4.75% comes as no surprise, despite concerns from the OBR that last week’s budget could push inflation up in the short-term.
“However, while inflation remains a concern, the decision signals an acknowledgement that high borrowing costs are weighing on economic momentum.
“The trade off may be a delay in further cuts previously expected to come in December.
“For the exchange markets, this rate cut could contribute to further fluctuations in sterling.
“GBP has stabilised against the Dollar since the US Election result was announced, and as today’s cut has been widely priced in, the impact should be muted.
“For individuals and businesses making international transfers or significant overseas purchases, it’s still well worth keeping a close eye crucial to keep a close eye on GBP movements in the coming days.”
George Holmes, managing director of Aurora Capital:
“The Bank of England’s decision to lower the base rate to 4.75% offers a glimmer of relief for small and medium enterprises (SMEs) grappling with escalating borrowing costs.
“However, this reduction must be viewed alongside last week’s Autumn Budget, including the 1.2% rise in employers’ National Insurance contributions and higher Capital Gains Tax rates.
“While the rate cut may slightly ease financing expenses, the overall financial landscape for small businesses remains challenging thanks to these new fiscal measures.
“SMEs should remain vigilant, exploring competitive refinancing options and seeking tailored financial advice to navigate this complex environment effectively.
“SMEs planning to borrow for expansion or investment should closely monitor how lenders adjust to the new rate and budgetary changes.
“Making informed funding decisions will be essential for sustaining growth and resilience in the months ahead.”
Nathan Emerson, CEO of Propertymark:
“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.
“With the Bank of England’s most recent Money and Credit Report revealing net mortgage lending has further increased by 0.9% in September, up on the 0.7% 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.”
Neal Moy, managing director of Paragon Development Finance:
“The reduction in Bank of England base rate will be welcomed by many, especially those looking to purchase properties.
“With further rate reductions imbedded in the swap rates this will be welcome news to many of our clients.
“This will be a positive step for our house builder clients, and may lead to an increase in demand for homes built as mortgages become cheaper, so we would expect to see an increase in enquiries for developers in the coming months.”
“Whilst it is positive, we must remember that the housing market is still stabilising after a turbulent few years, but the second reduction in base rate in just a few months is a good sign.”
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.
“For buyers and sellers alike, the bigger drag on confidence and activity remains a lack of available housing stock.
“Competition remains fierce in areas where affordable property is scarce, and it’s been the elephant in the room for successive governments.
“The Chancellor told us nothing we didn’t already know by acknowledged the UK’s housing crisis, but the repeated commitment to delivering 1.5 million new homes within the Parliament would make a tangible difference.
“However, until planning is reformed, and building begins at a grander scale than we’ve grown accustomed to, the market will remain locked in a supply-and-demand tug of war.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“As widely expected, the MPC voted to reduce interest rates by a quarter-point to 4.75% at today’s meeting.
“This is hugely positive for borrowers, with the Bank of England doing the right thing given inflation is below the 2% target.
“Those on base-rate trackers and variable-rate mortgages should see their monthly payments fall, and those savings will be gratefully welcomed by hard-pressed borrowers.
“While we are seeing a slight increase in mortgage rates, existing borrowers should engage with a whole-of-market mortgage broker approximately six or seven months prior to the current deal ending to lock into a new deal.
“Should mortgages rates rise further, you will be assured that something has been reserved but if rates fall, you can ask your adviser to reivew what is available nearer the time.
“New borrowers and first-time buyers should speak to a broker to run through the various schemes available to help them climb onto the property ladder, as well as how to make themselves as attractive as possible to prospective lenders.
“We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months, bringing further relief for homeowners and home ownership within the grasp of first-time buyers.
“However, what cannot be guaranteed is where rates end up, nor the pace it takes to get there. If you cannot afford to be wrong – that is, if rates were to rise you would struggle to pay the mortgage – then a fixed-rate mortgage usually makes sense.”
Robert Pritchard, head of capital markets at Cohort Capital:
“Today’s rate cut brings some much-needed – albeit marginal – relief for both personal and commercial property owners.
“While the market continues to offer significant opportunities, the landscape has been slightly more challenging over the past few years and this reduction will offer immediate support to those on floating rate loans.
“It will also provide a shot in the arm for those looking to acquire or refinance assets.
“However, for this cut to truly impact the property market, it needs to signal a sustained downward trend, as personal and commercial property lending is heavily dependent on the market’s view of rates over a three-to-five year period.
“The fiscal loosening outlined in the Government’s budget last week, along with a second presidency for Donald Trump, would suggest a sharp drop in rates is unlikely, but many hope that the drop in inflation could provide the central bank with more room for further reductions.
“Whilst not affected as much as the main residential market, the prime property sector has been impacted by the rise in interest rates, so the reduction by the BoE will be welcome.
“However stable Government policy and economic growth are the main drivers in this market.
“If the country cannot offer this it will not capture the benefits that a thriving prime property market can bring to the economy and public purse of the UK.”
Jamie Pritchard, managing director of sales at Glenhawk:
“Despite last week’s unnerving Budget, the MPC needs to persevere with an aggressive rate cut programme.
“Given the current macroeconomic trajectory, the target should be a minimum of three further rate cuts by next summer, bringing the base rate down to 3.75%.
“With wage growth having cooled more than expected and the very real possibility of deflation kicking in, the MPC has the means to give the economy the support it needs.
“House prices have continued to surge, although the new Stamp Duty surcharge is likely to pressurise buy-to-let transactions, and cheaper financing will be critical in helping bring forward the supply that is necessary across the country.”
Jerry Mulle, UK managing director at Ohpen:
“Today’s Bank of England base rate cut should be welcome news for homeowners and prospective buyers.
“The move should signal easing inflation rates and in turn, lower mortgage rates. However, mortgage owners and applicants are not out of the woods.
“Last week’s Autumn Budget announced a £70bn increase in spending which will have forced the BoE to take caution.
“In real terms, the Budget will also put added pressure on households and those already making mortgage payments, or planning to apply for a mortgage, as fixed mortgage rates are expected to remain high.
“Further, after Republican Donald Trump’s win, the UK economy will be bracing for the impacts resulting from increased US protectionism, which will see higher import tariffs and lower immigration policies, increasing US inflation and putting pressure on UK return on investment.
“Over the coming weeks and months home buyers are going to feel increased stress during what is already a challenging mortgage application process.
“In fact, our latest research into the current state of mortgage applications reveals that a third (32 %) of UK consumers found rising interest rates the most stressful part of the mortgage application process, rising to two fifths (41%) of Gen Y.
“In extraordinary times like these, the mortgage industry must make the mortgage application process more transparent and inclusive from the outset, to reduce stress in the process where possible.
“With a joined-up approach, the industry can simplify the application process by taking complex legacy technology out of the equation and enable better real-time data sharing between all the stakeholders involved in the home-buying journey.”
Neil Rudge, chief banking officer for commercial at Shawbrook:
“A further cut to the base rate this year is welcome news for SMEs, as it signals lower borrowing costs as a direct result of the Bank of England’s decision.
“Business leaders have faced considerable uncertainty this year with a General Election, a new Government, and the recent Autumn Budget all contributing to a challenging landscape for enterprises.
“While the rise in employer National Insurance contributions and minimum wages signals increased costs for firms, the Budget has eliminated speculation and uncertainty, enabling businesses to move forward, cautiously with their growth plans.
“We’re seeing continued resilience from business leaders, particularly in the mid-sized market, with a consistent appetite for new finance to fund ambitions.”
Guy Gittins, CEO of Foxtons:
“Whilst homebuyers will have been disappointed about the lack of a Stamp Duty relief extension in last week’s Autumn Budget, news today that interest rates have been cut will certainly help to boost their mood.
“The UK property market has already been showing strong signs of recovery in 2024 and this has been driven by improving market sentiment as a result of a more stabilised lending landscape.
“We also tend to see a wave of new buyer interest following a cut to interest rates, as those previously priced out of the market re-enter the fray and so today’s news will no doubt entice more buyers to make their move.
“With a Stamp Duty deadline now looming, we expect to see a supercharged level of market activity in the coming months as buyers look to complete before 1st April next year.
“Today’s decision to cut rates will only help add to this increased momentum and we now look set for a very strong end to the year and an even stronger start to 2025.
“There currently remains a good level of stock on the market, so whilst demand is set to climb, it’s unlikely to drive house prices to the same extent as it would in an under supplied market.”
Stephanie Daley, director of partnerships at mortgage advisor Alexander Hall:
“We’ve already seen mortgage rates trending downwards in recent months due to a higher degree of mortgage market stability and many within the mortgage sector will have already been anticipating today’s base rate cut.
“As a result, it’s unlikely we will see an immediate reduction in the current rates on offer to homebuyers and movers.
“However, today’s cut will bring further confidence to those looking to move, many of whom had previously delayed their plans due to higher rates, and this release of pent up demand will help to cultivate further property market positivity.
“Couple that with the increase in Stamp Duty as of April next year and we expect to see a rise in demand over the short term, which will also help to boost buyer confidence and potentially speed up transactions.”
Robert Sadler, vice president of Real Estate at Excellion Capital:
“While today’s cut to base rates is welcome news, we remain wary that any positivity will be muted by the negative impact of the recent Autumn Budget and the inflationary policies announced therein, the result of which is going to be a higher level of Government borrowing than anyone predicted.
“The fallout of the Budget’s inflationary pressures are also likely to mean that this is the only base rate cut we see for the remainder of 2024.
“On a positive note, we know from history that markets tend to overreact to bad news such as the Autumn Budget, after which they do eventually settle because certainty is more secure than possibilities and promises, even if the picture created by that certainty is less than perfect.
“And because of this certainty, we fully expect the Base Rate cut to result in a fall in swap rates, but due to the aforementioned impact of the Budget, this swap rate drop will be smaller than previously expected.”
Jonathan Samuels, CEO of specialist lender Octane Capital:
“Today’s decision to cut interest rates will bring some early festive cheer to the nation’s homebuyers who may still be haunted by the lack of a Stamp Duty relief extension in last week’s Autumn Budget.
“In fact, it’s fair to say that the long-term benefit of lower interest rates and the resulting increase in mortgage affordability is likely to entice more buyers into the fold compared to the number that might be deterred due to higher Stamp Duty costs.
“So all in all, today’s news will be warmly welcomed and we expect to see property market momentum continue to build, as buyers respond positively to improvements across the lending landscape.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts:
“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.”
Gareth Lewis, managing director of specialist lender MT Finance:
“Today’s decision to cut interest rates is a welcome move that will provide a much-needed boost to borrowers.
“Despite the market reaction to the Autumn Budget and the subsequent rise in swap rates, lower interest rates can stimulate economic activity, encourage investment, and reduce borrowing costs for businesses and consumers.”
John Fraser-Tucker, head of mortgages at Mojo:
“The Autumn Budget last week notably overlooked the mortgage market, leaving many existing borrowers and aspiring first-time buyers feeling uncertain about their options.
“It’s completely understandable to feel apprehensive, especially when some mortgage lenders have increased their rates after a period of decline.
“However, today’s decision by the Bank of England to reduce the base rate to 4.75% is a significantly positive move for mortgage borrowers.
“This second rate cut of the year brings relief to both homeowners and potential first-time buyers.
“We’re optimistic that this change will encourage mortgage lenders, who have recently raised their rates, to rethink their pricing strategies and lower their rates in the coming weeks.
“Existing mortgage holders should be pleased with this decision, as it presents new possibilities for securing better deals or benefiting from adjustments on current products, potentially easing financial pressures.
“If you’re planning to remortgage in the next six months, a mortgage broker can help you navigate the market and secure a new rate.
“For first-time buyers who have been waiting patiently for a more favourable environment, this could finally open the door to homeownership.
“Not only are mortgage rates expected to decrease, but first-time buyers also have until March 31 to take advantage of Stamp Duty relief, which allows you to purchase your first property without paying stamp duty on homes valued up to £425,000.
“After April 1, this threshold will drop significantly to £300,000, making it important to act quickly in the coming months—especially if you live in regions like the East of England, South East, or London, where the average property price for first-time buyers exceeds £300,000.
“Additionally, last week’s Budget announced that homebuyers will face an extra 2% Stamp Duty on second homes.
“This change suggests there may be less competition from landlords in the housing market.
“Overall, this move by the Bank of England is nothing short of positive and could mark a significant turning point for the mortgage market, offering both optimism and opportunity for current and future borrowers.”
Tony Hall, head of business development at Saffron for Intermediaries:
“Today’s decision to cut the base rate to 4.75% is a positive move for the broader housing market.
“Over the last month, we’ve seen mortgage approvals rise, hitting 65,650 in September – the highest figure in two years.
“This shows market confidence is growing, and lower rates prompted by the Bank’s latest cut could further stimulate lending by offering customers greater affordability when choosing a mortgage.
“With the dust now settling on the recent Budget, we’re expecting a more positive outlook going into 2025.
“However, in this more complex market, it is essential that buyers and those looking to remortgage seek out professional advice.
“Every individual’s circumstances are different and brokers can help them find the right product to suit their needs.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“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.”
Arjan Verbeek, CEO and founder of Perenna:
“If Rachel Reeves deployed a fiscal bazooka in the Budget, the Bank of England has continued to draw on its own arsenal to drive down borrowing costs and support growth.
“Lower rates alone don’t buy houses, so while this is change will be welcomed, it’s not going to move the dial materially for frustrated first timers.
“In reality, rate changes alone won’t tackle the affordability crisis we have in the UK.
“Plenty of potential homeowners already pay a lot more in rent than they would if they could secure a mortgage on current rates.
“The issues stem from their ability to secure finance in the first place.
“The restrictions placed on lenders via the loan-to-income cap only compound this problem, preventing individuals and families into homeownership who could afford it.”
Karl Wilkinson, CEO of Access Financial Services:
“Today’s BoE interest rate cut is solid evidence that years of inflationary shocks have now been put to bed.
“It’s particularly good news for first-time buyers determined to get out of rented accommodation.
“That said, many first-time buyers will still struggle to raise a deposit, which is where a 0% deposit mortgage will help.
“Economists were widely expecting this cut, bearing in mind that inflation is remaining around the MPC’s 2% sweet spot.
“However, we’ll be interested to read the Bank’s latest quarterly economic forecast to see what effect they think that the increased Government borrowing that Chancellor Reeves announced in the Autumn Budget will have on future rate cuts.
“Moving forward, we’ll probably see fewer cuts than previously expected due to the extra inflationary pressures, rises to the National Living Wage and employers’ National Insurance.”
Kevin Roberts, managing director, Legal & General Mortgage Services:
“The mortgage market has really opened up since the Bank of England announced its first cut in August, with borrowers finding dynamic and cheaper products in front of them.
“And while there’s recently been some uncertainty tied to the Autumn Budget and US Election, today’s decision should reassure borrowers that rates are on a downward trend.
“For those contemplating their next move in the mortgage market, they should consider consulting a professional mortgage adviser.
“This gives people the best chance of navigating changing rates and landing a product that fits their needs.”
Daniel Austin, CEO and co-founder at ASK Partners:
“The Bank of England’s rate cut of 0.25 combined with declining inflation and new fiscal measures, signals a potential shift toward more favourable conditions in the UK property market.
“House prices have shown consistent month-on-month growth, indicating a possible upward trend into 2025.
“The Autumn Budget’s £5bn allocation for new homes and a permanent 95% loan-to-value mortgage guarantee scheme aim to boost housing supply and stabilise property values.
“While this is beneficial for first-time buyers, it may be counterbalanced by lower Stamp Duty thresholds.
“Meanwhile, the rental market remains robust, bolstered by incentives like £3bn in Build-to-Rent housing guarantees, which enhance the appeal for developers.
“The Affordable Homes Programme also supports SME housebuilders, potentially increasing supply and alleviating market constraints.
“For property investors, the real estate sector remains a compelling alternative to gilts, with opportunities for growth.
“Despite the relief from excluding buy-to-let properties from Capital Gains Tax hikes, landlords continue to face higher Stamp Duty on second homes.
“This strain on the rental market, driven by limited supply, may temporarily boost the number of properties available for purchase, as mortgage approvals recover to pre mini-Budget levels.
“Developers focused on co-living and Build-to-Rent projects could benefit from a tighter rental supply—contingent upon favourable planning reforms.
“Private landlords exiting due to rising costs might channel their investments into alternative real estate strategies, such as property debt.
“These strategies offer attractive tax benefits, with income-based returns exempt from Capital Gains Tax on interest.
“As Capital Gains Tax liabilities potentially rise, this approach provides continued market exposure with greater financial efficiency, making it increasingly attractive within a shifting regulatory landscape.”
Warren Martin, director of operations at ONP Solicitors, part of Movera:
“Today’s rate cut from the Bank of England is a welcome step for the housing market and couldn’t be better timed.
“At ONP, we’ve seen transaction volumes taper off over the last two weeks, with many prospective buyers and remortgagers sitting tight in anticipation of this announcement.
“Now, with this decision, we hope to see lenders release some appealing, competitive mortgage products in the run-up to Christmas, which would help stimulate the market at year-end.
“This rate reduction is particularly encouraging for first-time buyers and those facing remortgage deadlines in 2025—an estimated 1.8 million homeowners who might otherwise be bracing for steeper repayments.
“Although some payment increases are likely inevitable, today’s decision should go some way to soften that blow.
“Additionally, with the Government’s recent measures to increase affordable housing, boost small housebuilder guarantees, and restrain speculative investments, this rate cut should enhance affordability across the board.
“All eyes will be on the upcoming CPS inflation figures on the 20th to see how these moves will translate to everyday costs, but today’s announcement certainly signals a positive shift for both affordability and accessibility in the housing market.”
Ryan McGrath, director of second charge mortgages at Pepper Money:
“Today’s interest rate cut, although widely anticipated across the market, may be the incentive many homeowners need to press on with house moves or home improvement projects.
“With demand for affordable and flexible financing solutions rising in order to fund loft extensions or kitchen overhauls, today’s rate adjustment offers new opportunities for homeowners to manage costs effectively while preserving their primary mortgage rate.
“This demand from homeowners has led to impressive growth within the second charge mortgage market – expanding by 17% year-on-year in the first half of 2024—outpacing all other lending segments, including first-time buyer lending.
“Between January and June, homeowners released a substantial £804m of equity through second charge mortgages, over 10 times the lending activity recorded in the buy-to-let market.
“While both the UK and international markets adjust to global events, the second charge mortgage market is showing its formidable resilience, poised to support homeowners by providing flexible and affordable options to meet evolving economic conditions.”
Michael McGowan, managing director, foreign exchange at Bibby Financial Services:
“While the recent Budget may have rattled businesses, today’s interest rate cut could be a welcome fillip for small businesses looking to invest and grow.
“However, muted expectations of further UK rate cuts into next year, a new US administration, and continuing geopolitical turmoil make for a still uncertain economic outlook.
“That means SMEs would be wise to plan for a variety of outcomes – continuing to be ambitious, but also ensuring their plans are based on prudent cost and cashflow management.
“And businesses trading internationally should ensure they protect themselves against currency risk with coherent FX strategies.”
Nicholas Hyett, investment manager at Wealth Club:
“After two weeks of volatile political theatre the Bank’s decision to stick to the script and cut rates is very welcome.
“Inflation remains moderate and economic growth positive, if anaemic.
“The Chancellor will be pretty pleased with the Bank’s assessment of the last week’s Budget.
“Yes it will drive a modest pickup in inflation, but GDP is also expected to be around 0.75% higher next year than it would otherwise have been.
“The big unknown is the future path of wage growth. A relatively tight labour market has driven sticky service inflation, but now seems to be easing.
“The problem is that rises to the minimum wage and National Insurance contributions in the Budget have the potential to keep service inflation higher going forwards if employers pass those costs on.
“All in all, this is far from a showstopping set of MPC minutes – it feels like the Bank is happy to wait in the wings and see how the politics plays out.”
David Hollingworth, associate director at L&C Mortgages, said:
“Good news for borrowers as the widely anticipated cut brings the base rate to 4.75%, dropping back below 5% for the first time since June last year.
“That helps continue the downward trajectory for interest rates, which is expected to continue into next year.
“However, focus will be on whether the mood has changed in terms of how sharply rates might fall and whether the path may not be as steep or fall as far as previously expected.
“Most borrowers have continued to fix their rates to benefit from the lower rates they offer when compared with variable rate deals.
“Counter intuitively those fixed rates have been nudging upwards despite the cut to base rate, as the market perception of the inflation and rate outlook has shifted.
“Last week’s Budget and the US Election have added a hint of uncertainty around future rate movements. That has already caused a flurry of price changes to feed through with most resulting in fixed rates being hiked.
“That is likely to continue unless markets are reassured by today’s decision and funding costs ease back.
“In the meantime, lenders will continue to readjust their rates to find the right balance and the level at which the market will settle.
“Any borrower agonising over whether to take a fixed rate now should reach a decision sooner rather than later.
“There are still some extremely sharp rates on offer with some rates still available below 4% but these are bound to be feeling the pressure.
“Applying for a deal will secure the rate and avoid any further increases. At the same time, they can still review the deal if rates do subsequently drop back.
“Tracker borrowers will have the most to cheer as they will see their payments fall. That could knock a little under £30 off the monthly payment of a £200k 25 year mortgage.
“We will see how lenders pass through the latest cut to standard variable rates but borrowers should be under no illusion that they could be better off switching to a better deal when variable rates can easily be more than 8%.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“The Bank of England’s decision to reduce the Bank rate to 4.75%, offers encouraging news for older borrowers.
“For those over 50, who often face unique financial considerations, this rate cut could ease monthly repayments.
“Combined with measures from last week’s Budget, such as a 4.1% increase in the State Pension from April 2025, today’s decision can enhance financial stability for the older generations and help with affordability and choice in the mortgage market.“
Peter Stimson, head of product at MPowered Mortgages:
“Anyone hoping that the Bank’s decision would instantly open the floodgates to cheaper mortgages is likely to be disappointed.
“In fact the mortgage rates offered both to new borrowers and remortgagers could even increase in coming weeks.
“There are two reasons for this. The first is that today’s Base Rate cut of 0.25% had widely been seen as a certainty, which financial markets have been pricing in for weeks.
“The second is less obvious. The swaps market – which is essentially the wholesale cost of fixed rate money that lenders offer out as mortgage loans – has been rising since mid-September.
“Several lenders have even been offering mortgages at below the swap rate just to win business. Longer term, this position isn’t sustainable and mortgage rates will need to rise to reflect the current position of fixed rate money.
“Whilst today’s Base Rate cut is welcome, it’s unlikely to be the turning point prospective buyers have been hoping for.
“Looking ahead, rates are likely to tick down slowly, rather than tumble, given the increasing divergence between fiscal and monetary policy.
“The Bank’s Monetary Policy Committee meeting noted that consumer inflation is likely to jump back up above its 2% target at the end of the year – suggesting that a further Base Rate cut next month may be off the table and a slower, more watchful ‘wait and see’ approach for 2025.
“With both the UK and US Governments now appearing intent on adopting policies which, to a greater or lesser extent, are inflationary, central bank monetary policy is finding itself on a collision course as it attempts to cut interest rates while gilt and swap rates are rising.
“This tension will be an interesting one to watch, and the path to further rate reductions next year is unlikely to be smooth.”
Andrew Gething, managing director of MorganAsh:
“While some may have been worried about the impact of the Budget on a potential rate cut, the fall in headline inflation was clearly enough for the central bank to make its move – as widely predicted.
“The Budget and changes to both Government borrowing and the UK tax burden are more likely to impact the frequency of future decisions.
“There’s no question that the MPC will want to see this how this all plays out – as well as carefully watch activity abroad in the States and the Middle East, for example.
“Nonetheless, today’s news will be positive for potential buyers, as well as current borrowers – particularly those with variable or tracker mortgages.
“While it offers some welcome relief to the financial pressures felt by many households, it’s important to remember that we’re still not out of the woods just yet.
“Among positive signs, arrears data released today highlights the many households still facing real difficulty and in a potentially vulnerable situation.
“Just recently, we have seen examples of big-name firms in multiple sectors being fined for not looking after their vulnerable customers.
“Perhaps more alarming is that many firms that are still reporting few or even zero vulnerable customers – which just isn’t possible.
“Even with improving rates, it remains absolutely critical for businesses to know who their vulnerable customers are – and what outcomes they are receiving.
“Good data and robust processes are essential in achieving this.”
