The Bank of England’s Monetary Policy Committee (MPC) lowered the base rate from 4.5% to 4.25% earlier today, voting by a majority of 5:4. However, two members preferred to cut the base rate further to 4% and another two members preferred to keep the base rate at 4.5%.
Ben Thompson, deputy CEO of Mortgage Advice Bureau, said today’s base rate drop “won’t come as much of a surprise, especially considering recent goings on across the pond”.
“Despite inflation being likely to tick up again in the near term, the focus has now flipped to ensuring economic growth. Markets have been quick to price in future rate cuts, and consequently, it’s great to see so many mortgages now priced below 4%.
“We now have real wage growth, lower mortgage rates, and a favourable rate outlook, plus a record-high number of mortgage products overall. We’re even seeing some helpful lending for first-time buyers, and hopefully that continues to grow, enabling more renters to become homeowners,” he explained.
Thompson said the base rate cut is a “small tailwind for the first time in a long time” despite “predictable unpredictability globally”.
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“It does now feel like a good time to buy, and a better time to refinance for those that need to.
“For customers looking to get mortgage ready, now is a great time to take advantage of the market. With the expertise and guidance of a broker, you can secure a deal that works for you and your financial circumstances,” he said.
Mark Harris, chief executive of mortgage broker SPF Private Clients, agreed about the base rate cut but said the MPC “missed an opportunity to be bold” and cut the base rate to 4%.
“This would have sent out a strong message, helping boost the housing market and wider economy, particularly as the stamp duty concession has now ended.
“Swap rates continue on a downwards path, with lenders reducing mortgage rates in recent weeks and a plethora of sub-4% deals now available. This latest rate reduction was largely expected by the markets and has been factored into pricing already. However, a continual decline in swaps would enable lenders to price more keenly in future, easing borrowers’ affordability concerns further,” he said.
Harris urged those looking at a new mortgage or refinancing to plan ahead as much as possible and seek advice from a broker.
“We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months, but what can’t be guaranteed is where rates end up, nor the pace it takes to get there,” he noted.
Further base rate cuts expected but full extent uncertain
John Phillips, CEO of Just Mortgages and Spicerhaart, said that while today’s move was expected, it will be “interesting” as to what happens next and whether today is the “opening of the flood gates for further and more frequent cuts – with some predicting three or even four more cuts in 2025”.
“While there’s no question that President Trump’s trade war has forced the central bank to act with some urgency, so have fears around inflation and both business and consumer confidence – particularly in response to higher taxes and costs.
“Either way, movement on the base rate is absolutely welcomed and will certainly help to stimulate demand. Given the certainty around today’s news, we’ve already seen swaps respond positively and lenders re-price, with the competition for market share likely only to increase with future moves,” he said.
Matt Smith, Rightmove’s mortgage expert, agreed that there was uncertainty around how trade tariffs will impact the global economy but noted that financial markets were forecasting 2-3 base rate cuts this year, which could bring us a base rate of 3.75%.
He noted that in the short term, movers can “expect average mortgage rates to trickle downwards over the next few weeks, but not dramatically”.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said the base rate cut “offers hope that the mortgage misery of recent years will continue to ease” for homeowners.
“Borrowers on tracker mortgages pegged to the base rate will see a more or less immediate reduction in their monthly repayment, while those locked into expensive fixed rate deals with multiple months or years left to run must remain patient, as their costs will stay the same.
“Borrowers rolling off cheap five- and 10-year fixed-rate deals taken out before the Bank of England began hiking rates are still likely to face an increase in repayments when they eventually refinance, though the rise in costs may now not be as heavy as anticipated,” she said.
Haine said the news would be welcome for first-time buyers as it “bolsters their chances of actually getting a foot on that elusive property ladder”.
“High prices, the painful process of raising a deposit, and the challenge of meeting lenders’ affordability criteria have been barriers to homeownership for many in recent years.
“While new buyers must now contend with higher stamp duty charges, after the property tax thresholds reverted to their previous lower levels at the start of April, a fourth rate cut coupled with some lenders loosening their affordability criteria offers hope from here,” she noted.
