12:22 PM, 8th May 2025, About 2 weeks ago
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As widely predicted, and not this time following the US Federal Reserve, the Bank of England’s Monetary Policy Committee (MPC) voted 5-4 to reduce the Bank Base Rate by 0.25% to a total rate of 4.25%.
Although it looked like a close vote, two MPC members wanted to reduce the rate by 0.5% points, and two members preferred to maintain at 4.5%. The majority falling on a 0.25% reduction, showing the overwhelming pressure for a cut in rates. This is because, despite CPI inflation still being above target at 2.6% there are serious concerns over the stalling of GDP growth and the labour market loosening.
Recent increases in energy prices are yet to show in CPI inflation, with a predicted rise to 3.5% for 2025 Q3, but only for the short term.
The MPC summary reported:
“Uncertainty surrounding global trade policies had intensified since the imposition of tariffs by the United States and the measures taken in response by some of its trading partners. There had subsequently been volatility in financial markets, and market-implied policy rates had moved lower. Prospects for global growth had weakened as a result of this uncertainty and new tariff announcements, although the negative impacts on UK growth and inflation were likely to be smaller.
The May Monetary Policy Report set out two illustrative scenarios from a much broader set of plausible paths the economy could take.
Depending on how trade policies unfold, UK inflation could be affected by a wide range of factors such as shifts in trade patterns, supply chain disruptions in the UK and abroad, and movements in global exchange rates. It was possible that the ultimate net effect of these developments could be materially more disinflationary for the UK than in the baseline forecast, but it was also possible that the effect could be slightly inflationary in the longer term. Overall, it was too early to conclude over what period and to what degree different economic effects could materialise.
All MPC members stressed that monetary policy was not on a pre-set path. The Committee would remain sensitive to heightened unpredictability in the economic environment and would continue to update its assessment of risks.”
Ryan Etchells, Chief Commercial Officer at specialist property lender Together, said: “The fallout from US President Donald Trump’s policy on tariffs has caused a huge amount of instability, leading to economists predicting a slowing global economy.
“To combat the likelihood of US policy depressing the UK economy, The Bank of England’s has decided to cut its base rate by 0.25% to 4.25%, lowering the cost of borrowing for individuals and businesses, which will provide a much-needed boost to the UK property market.
“It will mean those who were facing steep monthly mortgage payments will now be able to access lower rates, allowing more home buyers who would previously have been priced out of the market to achieve their property ambitions.
“Homeowners on variable rate and tracker mortgages will also feel the benefits of the central bank rate cut, as will buy-to-let landlords, who have had to contend with higher costs and increased red tape over the past few years.”
He adds: “Despite these recent challenges, our latest research reveals a resilient buy-to-let market, with a third of those landlords planning to expand or diversify their portfolio in the next 12 months. Those keen to seize an opportunity and move forward with their property plans are best to consider the wide range of financial products available, such as commercial and buy-to-let and commercial mortgages or bridging loans for fast, flexible finance.”
Simon Gammon, Managing Partner, Knight Frank Finance, said: “This 25bps cut will support sentiment in the property market by entrenching the view that mortgage rates are now moving in the right direction. The lenders have cut rates pretty aggressively during the past month and almost all the major institutions have fixed rates available below 4%. That’s quite a bit lower than looked likely only a few weeks ago.
“The fact that two MPC members voted for a bumper 50 basis point reduction could perhaps trigger a few more mortgage rate cuts during the weeks ahead. The lenders are engaged in a fierce battle for market share and are eager to make cuts the moment they are able to do so.”
Steve Cox, chief commercial officer at Fleet Mortgages: “The Bank of England’s decision to cut Bank Base Rate today marks a further pivotal moment for the mortgage market and comes off the back of a steady downward trend in swap rates over recent months. We’ve already seen this reflected in product pricing, with Fleet ourselves having made a number of reductions to our buy-to-let product rates recently. For lenders and advisers operating in the buy-to-let sector, this provides a welcome boost — a clearer signal that affordability continues to improve, giving more landlord borrowers the opportunity to secure the funding they need.
“Of course, we can never be absolutely certain of the long-term direction of travel, but the recent trend does suggest rates will continue to edge downwards, which will only strengthen landlord confidence. Lower rates not only make deals more accessible but also ease the ongoing pressure on monthly mortgage payments — something that’s been front and centre for borrowers since the post-Mini Budget turmoil.
“The rate shift since the summer of last year has shifted that dynamic, supporting landlords in maintaining sustainable portfolios and opening up options for remortgaging and further investment.”
Richard Donnell, Executive Director at Zoopla, comments: “Today’s base rate cut is welcome news for people looking to sell and buy homes in 2025.
It will provide a boost to market sentiment and filter slowly into lower mortgage rates as the cost of fixed-rate mortgages already reflects future cuts in the base rate. This, alongside reforms to mortgage regulations announced recently, will help boost buying power. This is important at a time when there is a large number of homes for sale across the UK – the average agent has 34 homes for sale. Improved buyer confidence will support sales and help more people realise their moving ambitions in the year ahead.”
Nathan Emerson, CEO of Propertymark, said: “Today’s news will no doubt be extremely welcome for many, especially given current economic uncertainties. International bodies have recently stated they expect interest rates to fall in the UK as the year progresses. Overall, we hope to see interest rates further continue their downward trajectory over the course of 2025.
“The UK housing market has recently been buoyed by Stamp Duty threshold changes leading up to the start of April, and with the busier spring and summer months now here, this base rate reduction should attract even more buyers and sellers to the market and provide greater affordability.
“Housing is a central part of the UK economy, and we now hope to see considering the UK Government and the devolved administrations have shown a keen focus on housing growth, is that they look ahead to achieving their individual housebuilding targets to meet growing demand.”
Sarah Thompson, Managing Director at Mortgage Scout: “The Bank of England’s decision to cut the base rate today is a timely and much-needed boost for borrowers. After a prolonged period of high interest rates, this shift should help ease affordability pressures and unlock more movement from first-time buyers and homeowners.
“We’re already seeing signs of renewed confidence with searches for remortgaging up by 34% in Q1, according to Legal & General, as borrowers look ahead to what rates might be when their current deals come to an end. At the same time, several lenders have recently increased their income multiples, further improving affordability and opening up more options for borrowers.
“With around 1.8 million fixed-rate mortgages due to mature by the end of 2025, today’s rate cut offers some welcome relief – but it’s just the start. If rates continue to fall towards the predicted 3.5% by year-end, we expect even greater momentum to build across the market.”
Matt Thompson, head of sales at Chestertons, says: “With interest rates now at 4.25%, more rate cuts on the horizon and a number of lenders offering sub-4% mortgages, the property market will undoubtedly see an increase in buyer activity.
“Particularly motivated will be first-time buyers who were unable to secure a property ahead of the changes to Stamp Duty thresholds and will see the lower interest rates as a window of opportunity to resume their search. House hunters who are in no rush, might wait until the Bank of England announces another rate cut but as buyer demand strongly outweighs the number of available properties, this strategy could see some buyers missing out.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “The Bank of England has reduced rates by a quarter point to 4.25%, which comes as no real surprise with CPI inflation at 2.6% in the year to March, down from 2.8% in February.
“However, the Bank missed an opportunity to be bold and cut by half a point to 4%. This would have sent out a strong message, helping boost the housing market and wider economy, particularly as the stamp duty concession has now ended.
“Swap rates continue on a downwards path with lenders reducing mortgage rates in recent weeks and a plethora of sub-4% deals now available. This latest rate reduction was largely expected by the markets and has been factored into pricing already. However, a continual decline in Swaps would enable lenders to price more keenly in future, easing borrowers’ affordability concerns further.
“Those looking to take out a new mortgage or refinance in coming months should plan ahead as much as possible, seeking advice from a whole-of-market broker. We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months but what can’t be guaranteed is where rates end up, nor the pace it takes to get there.”
Emily Williams, director of research at Savills, said: “Today’s rate cut by the Bank of England should give homebuyers confidence that mortgage affordability will continue to improve, despite the recent global trade uncertainties.
“Fragile buyer sentiment has caused housing market recovery to lose some traction in the last couple of months, despite a strong start to the year. The latest data from TwentyCi shows a -5.4% drop in net agreed sales year-on-year and a slight uptick in instructions ( 2.2%), which indicates a cooling in market activity now that the stamp duty deadline has passed, and within the context of sluggish economic growth.
“This uncertain backdrop continues to undermine buyer confidence, even with a competitive mortgage market and expectations of further base rate cuts.
“It looks like we are in for at least another two rate cuts this year, which should gradually widen the pool of buyers and increase their buying power. Additionally, we are seeing some lenders ease the affordability tests they put borrowers through, on the back of revised guidance from the Bank of England.
“This could support a more stable recovery in the medium term, though weak consumer sentiment is likely to keep market conditions subdued for now.”
Matt Smith, Rightmove’s mortgage expert says: “The much-anticipated second rate cut of the year has arrived, and with some lenders having taken their time to pass on the benefits of the expected Bank Rate cut, I think we may now see further reductions in the coming days and weeks. A fresh round of mortgage rate reductions could be a boost for buyer demand as this year’s Spring Selling season approaches its end.
The lowest available five-year and two-year fixed mortgage rates are edging downwards, with the cheapest available two-year fixed rate the lowest it’s been since before the mini-Budget. Since the last rate cut, we’ve also seen how lenders are trying to help home-buyers outside of reducing rates, by reviewing their affordability criteria.
“Looking ahead, there’s still a lot of uncertainty over how trade tariffs may impact the global economy, so it’s difficult to make predictions right now. However, as it stands, the financial markets are forecasting two-to-three more Bank Rate in 2025, which could take us to a rate of 3.75% by the end of the year. In the short-term, I think movers can expect average mortgage rates to trickle downwards over the next few weeks but not dramatically.”
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