Bank of England interest rate cut ‘will have a limited impact on mortgage rates’

On Thursday the Bank of England has cut interest rates by a percentage point to 5% as the Monetary Policy Committee (MPC) voted 5 to 4 to lower the base rate.

The decision by the Bank of England comes after the consumer price index rate of inflation has fallen to 2%, which was the target the MPC had set.

Governor Andrew Bailey said, “Inflationary pressures have eased enough that we’ve been able to cut interest rates today.

“But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much. Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.”

Simon Gammon, managing partner of Knight Frank Finance, said, “Today’s decision will have a limited impact on mortgage rates but it will be transformative for sentiment.

“There is a meaningful group of buyers that put off moving home in the wake of the mini-budget that can now push on with confidence. The Bank of England has been particularly cautious, so by opting to cut the base rate it has sent a real statement that inflation is largely beaten.

“The lenders have already cut margins to the bone, so this cut was pretty much priced into fixed rates.

“That said, we’ve seen that the larger lenders are happy to take a hit to profits to gain market share, so we may well see another round of marginal cuts in the days ahead.”

Guy Gittins, Chief Executive Officer, said, “Today’s base rate reduction will come as a welcome surprise for the nation’s homebuyers and one that will only add to the property market momentum that has been building so far in 2024.

“We’ve already seen monthly mortgage approvals sitting at consistently high levels as pent-up demand across the market has been released and, in recent weeks, mortgage rates have continued to trend downwards, with several five year fixed term mortgages available with rates below four percent.

“With interest rates now starting to fall, we only expect that these positive property market trends will intensify.”

Jason Ferrando, CEO of easyMoney said, “Mortgage market activity has been building steadily so far this year and while today’s cut may be marginal, we can expect it to act as a shot in the arm for the sector and one that will spur more buyers to get off the fence and get on with their plans to purchase.

“What’s more, today’s cut is likely to be the tip of the iceberg and we could well see another before the year is out, which will only help to fuel market momentum further.”

CEO of Octane Capital, Jonathan Samuels, said, “We’ve seen a far more settled landscape materialise since the base rate was held at the back end of last year and this stability has been key to the slow but steady recovery of the property market in 2024.

“However, today’s somewhat surprising decision to cut rates for the first time since March 2020 is likely to stoke the furnaces with respect to buyer demand levels and accelerate this recovery at a greater pace than expected.

“We’ve already started to see swap rates reduce in recent weeks, which suggest that mortgage rates are soon to follow, but it’s likely that many lenders will now act sooner rather than later which will help ease the cost of borrowing for the nation’s homebuyers.”