How Today's Bank of England's Base Rate Cut to 4.5% Impacts the UK Property Market - 6/2/2025
The Bank of England's base rate cut from 4.75% to 4.5% could bear positive news for property buyers and sellers in the UK. Find out more in our article below.
Buying a property is a significant milestone in life, but it's crucial to consider the broader economic climate when making such a substantial investment. The recent decision by the Bank of England to lower its base rate from 4.75% to 4.5% might now result in cheaper borrowing rates which could have a huge ripple effect on the broader market.
This base rate alteration directly impacts the monthly repayments of approximately 600,000 homeowners with mortgages that track the Bank of England's rate. A reduction of 0.25 percentage points can lead to savings of around £29 per month, offering some relief to those locked into variable-rate deals. However, most mortgage customers hold fixed-rate agreements, shielding them from immediate payment adjustments but signalling potential changes in future financing arrangements.
Despite the rate cut, mortgage rates remain considerably higher than the levels observed over the last decade. According to Moneyfacts, the average two-year fixed mortgage rate is 5.50%, while a five-year deal hovers around 5.30%. Additionally, the average two-year tracker rate is 5.46%, indicating that both homebuyers and those seeking to remortgage face increased financial outlays compared to previous years.
With an estimated 800,000 fixed-rate mortgages featuring an interest rate below 3% set to expire annually until 2027, the real estate landscape is poised for substantial shifts. A stable interest rate climate may bring temporary respite, but the dynamics are intricate given uncertainties stemming from global events and financial policy changes.
As Estate agents, we act as pivotal conduits in property transactions and must help our clients navigate this evolving scenario with expert guidance and insight. Understanding the implications of interest rate fluctuations on mortgage affordability can empower buyers to make informed decisions regarding property purchases. Utilising tools like mortgage calculators allows prospective buyers to assess different scenarios and plan in anticipation of future interest rate variations. So speak to the team to discuss what this might mean to you, and we will happily assist you in obtaining quotes on your next mortgage; potentially unlocking your dream move.
In conclusion, while the Bank of England's base rate is welcome news to the property sector, we now await the response from lenders to see how home movers might be affected in the first quarter of 2025.
