The Bank of England (BoE) has today announced a cut to the base interest rate, lowering it to 4.25%. This quarter-point reduction is the second interest rate cut of 2025, and it’s set to offer welcome relief to borrowers while giving momentum to the housing market.
Looking Ahead
Economists expect interest rates to continue falling throughout the year, driven by a number of deflationary pressures. One of the most notable factors is the falling price of oil, which is now at a four-year low.
In addition, the global impact of Trump’s renewed tariff war may lead China to redirect exports to other consumer markets, including the UK. While the long-term consequences of this policy remain uncertain, many believe it will contribute to further downward pressure on prices.
According to Morgan Stanley, the base rate could fall to 3.25% by the end of 2025 and potentially reach 2.75% by mid-2026. Such a trend would mark a significant shift in the UK’s financial landscape.
Impact on Mortgage Rates
The interest rate set by the BoE directly influences the cost of borrowing and the returns for savers. While this week’s announcement may not be good news for savers, it is certainly encouraging for mortgage holders and property buyers.
Homeowners with tracker mortgages are likely to see an immediate reduction in their monthly payments. Meanwhile, those on fixed-rate deals will benefit when they come to remortgage, as lower rates gradually filter through the market.
Buyers seeking to enter the property market or invest in additional property should find it easier to secure a more competitive mortgage deal. HSBC, anticipating the rate cut, reduced its product rates last week, with all its mortgage offerings now below 5% – the first time this has happened since 2022. Buyers with larger deposits may even be able to access rates below 4%.
Boost for the Property Market
Lower interest rates tend to stimulate the property sector. With borrowing costs reduced, more prospective buyers enter the market. This not only increases buyer activity but also expands the pool of potential purchasers for those looking to sell.
Higher levels of competition among buyers can support or increase property values, making it a promising time for sellers as well.
What This Means for You
Whether you’re looking to buy your first home, remortgage, or sell your current property, today’s announcement presents new opportunities. With the interest rate expected to continue falling, now could be an ideal time to make your move.
For tailored advice and support in navigating the current interest rate environment and property market, get in touch with our team today.
And if you know someone who would benefit from this update, feel free to share it with them.
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