The Bank of England has given the UK property market a welcome boost by reducing the base rate from 4.25% to 4%. The quarter-point cut, announced today by the Bank’s Monetary Policy Committee (MPC), marks the fifth rate reduction in the past 12 months.
This change is positive news for homebuyers, homeowners remortgaging, and property investors, as the base rate strongly influences the cost of borrowing. When the Bank of England lowers the base rate, mortgage interest rates offered by banks and building societies often follow suit.
Why the Base Rate Cut Matters
A lower base rate makes mortgage repayments more affordable for many, especially those on tracker or variable-rate mortgages. It also supports those looking to refinance, particularly in light of rising household costs and inflation.
Lenders use the Bank of England base rate to determine what interest to charge borrowers. As such, a reduction in the base rate may encourage greater buyer activity in the UK housing market, especially among first-time buyers and those upsizing.
Market Outlook
According to financial analysts, the Bank of England may introduce another base rate cut before the end of the year in an attempt to further stimulate the economy. However, such a move is not guaranteed at the next MPC meeting scheduled for 18 September.
In a statement released today, the Bank said:
A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate.
This suggests a more measured pace of cuts moving forward, with future decisions likely influenced by inflation and economic growth indicators.
Summer Surge in Property Activity
Contrary to the common belief that the housing market slows in summer, recent data shows a noticeable uptick in activity. According to Zoopla, buyer demand in June was 11% higher than at the same point last year, and sales agreed rose by 8%.
The portal predicts there will be 5% more property transactions this year compared to 2024, although house price growth is expected to remain modest at just 1%. The market is balancing increased demand with ongoing economic uncertainty and higher stamp duty thresholds.
Improved Conditions for First-Time Buyers
Conditions for first-time buyers have also improved. Lenders are now able to offer more high loan-to-income mortgages (typically those exceeding 4.5 times a buyer’s income), thanks to relaxed rules from policymakers.
Affordability has also shifted in the buyer’s favour. Nationwide’s Chief Economist, Robert Gardner, reports that the average UK property now costs around 5.75 times the average income. That’s a notable improvement from the peak in 2022, when the figure stood at 6.9 times.
With interest rates softening, mortgage product availability increasing, and affordability gradually improving, this could be a promising time for many first-time buyers to take their first step on the ladder.
The Bank of England base rate cut is good news for the UK property market, especially for buyers, sellers, and those looking to remortgage. While challenges such as economic volatility and stamp duty costs remain, the outlook for the second half of 2025 is more positive.
If you’re thinking of buying or selling a property, get in touch with us today. We’re here to help guide you through the changing market with clear, local advice.
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