Following a hold in December 2024, the Bank of England has today cut interest rates to 4.5%.

This comes as a result of inflation remaining relatively stable and decreasing to 2.5% (December 2024), despite being higher than the Bank of England target rate of 2.0%.

The decision to cut the base rate by the Monetary Policy Committee was the result of all nine members voting in favour of reducing the rate, with two members even voting for a cut to 4.25%.

Thomas Cantor, Co-Head of Short-Term Finance at West One Loans, said, “Whilst inflation has crept above the Bank of England’s target of two percent in recent months, the rate of inflation seen over the back end of last year has remained largely stable and significantly below the peak seen towards the end of 2022.

So today’s base rate cut was largely expected and whilst it may only be a small step in the right direction, the hope is that this trend will continue over the course of the year, bringing some much needed impetus to the economy, helping to drive further positive sentiment in 2025.”

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Stephanie Daley, Director of Partnerships at mortgage advisor Alexander Hall, said, “The Bank of England’s decision to reduce interest rates to 4.5% will come as a welcome one to the nation’s homebuyers, bringing a much needed boost to property market sentiment, following the slight upward pressure on prices caused by increasing inflation levels in recent months.

However, with the level of inflation remaining above the Bank of England’s two percent target, it’s likely that lenders will continue to act with vigilance and we can expect this ongoing uncertainty to be reflected in mortgage pricing.

So whilst we are heading in the right direction and some lenders are reducing their rates,  those planning their move should continue to seek the advice of an expert mortgage advisor to ensure that they are securing the very best rate available to them in the current market.

One potentially positive outcome will be the reduction in certain lenders stress rates, which could give a bit more flexibility in affordability for customers and possibly give them more buying or remortgage options”

CEO of specialist lender Octane Capital, Jonathan Samuels, said, “A reduction to the base rate is certainly positive news, however, it’s the swap rates market that dictates the level of mortgage affordability passed onto the nation’s home movers.

The good news is that the mortgage sector has been responding well ahead of today’s decision and, not only have we seen swap rates start to reduce over the course of this month, but many lenders are already reducing their mortgage rates in response.”

Robert Sadler, Vice President of Real Estate at Excellion Capital said, “This rate reduction takes us one step closer to where we need to be. But property investors will welcome this news with more than a little caution. While this decision may result in lower interest rates, it still doesn’t feel like we’re approaching the end of the UK’s economic uncertainty.

Last autumn’s inflationary budget and Labour’s handling of the economy to date have created a lack of confidence among both investors and lenders. In fact, such is the negative sentiment right now that we are seeing lenders demonstrate an unwillingness to even consider incredible deals, particularly retail deals, where the assets are being bought at historically cheap prices with yield potential of 16%. This is despite experienced sponsors with solid business plans.

If this negative sentiment has any chance of lifting, we’re going to need more proof from this government that they can manage the economy effectively and in favour of the investors who are, let’s be frank, at the centre of helping the economy grow.”

Co-founder and CEO of GetAgent.co.uk, Colby Short, said, “The move to lower interest rates is no doubt the right one as inflation levels have remained broadly stable for some months now.

We’ve already seen the mortgage industry react positively in anticipation of today’s news, as swap rates have fallen and many lenders have moved to lower the mortgage rates on offer.

So whilst the property market may currently be benefiting from a minor surge in activity ahead of April’s stamp duty deadline, today’s decision should act as a further shot in the arm, although we expect the long-term picture to be one of more measured growth, with market momentum building gradually as the picture continues to improve.”

CEO of Yopa, Verona Frankish, added, “Despite the fact that interest rates haven’t fallen at the speed we expected, we’ve seen a strong and consistent level of buyer activity sweep the property market over the last year and, with a further reduction today, we expect this to remain the case as we look to the year ahead.

Of course, mortgage rates currently remain far higher than today’s home movers have become accustomed to in recent years and so a degree of caution is advisable. However, we’re already seeing lenders react positively by reducing rates and we expect the picture to continue to improve over the course of the year where mortgage affordability is concerned.”