Bank of England base rate cut: What it means for the property market

After a year of the Bank of England base rate being held steady at 5.25%, it has been announced today that the rate will be cut to 5%. This 0.25 percentage point reduction is the first since April 2020, when the base rate was set at a historic low of 0.1%. This change follows a period of steady increases between December 2021 and August 2023.

A key reason for the reduction is that inflation is now meeting the 2% target set by the UK Government. This indicates that the economy is stabilising after months of fluctuations. Lower inflation suggests that the cost of goods and services is no longer rising rapidly, easing the financial pressure on households and businesses. The Bank of England base rate cut reflects a positive outlook for economic growth and stability.

What does the base rate reduction mean for the property market?

For home buyers

Home buyers can look forward to better mortgage deals, which can enhance their affordability rating. Lower interest rates mean that monthly mortgage payments will be reduced, making it easier for buyers to manage their finances. This might allow them to consider a wider range of properties or retain more money each month for other living expenses. Additionally, first-time buyers who have been struggling with high mortgage rates may find this an opportune moment to enter the market.

For home sellers

The reduction in the interest rate signals confidence in the broader economy, potentially attracting more buyers to the market. Lower mortgage rates can make buying a home more affordable, which is essential for driving property transactions and securing sales. Sellers might see an increase in the number of viewings and offers, helping to achieve quicker and potentially higher-value sales. This boost in market activity can also lead to a more competitive market, benefiting those looking to sell their properties.

For homeowners

If you are nearing the end of your current fixed-rate mortgage deal, this reduction could mean you’ll find more favorable terms for your new mortgage. Homeowners with variable-rate mortgages may also see an immediate decrease in their monthly payments. This extra disposable income can be used for home improvements, savings, or other expenses. It’s also a good time for homeowners to consider remortgaging to lock in lower rates and reduce long-term interest costs.

The base rate cut is not just a financial adjustment; it’s a signal of the Bank of England’s broader economic strategy. By lowering the base rate, the Bank aims to stimulate economic activity by making borrowing cheaper and encouraging spending and investment. This move can help support the housing market, boost consumer confidence, and promote overall economic growth.

Advice for buyers and sellers

With the ongoing potential for future interest rate changes, we advise both buyers and sellers to seek independent, professional mortgage advice to find the best deals available. Professional advisors can offer tailored advice based on individual financial situations and market conditions, ensuring that you make informed decisions whether you are buying, selling, or remortgaging.