The Bank of England has reduced interest rates from 5.25% to 5%, marking the first decrease since the start of the pandemic in March 2020.
The cut comes as a result of wider economic stability and inflation holding at 2% for the last two months. In response to the Bank of England’s announcement on interest rates, Nathan Emerson, CEO of Propertymark, commented:
“Today’s rate cut it is excellent news for the housing market and no doubt a huge sigh of relief for those who have felt the pain of higher interest rates for the last two years. Summer is traditionally a busy time of the year for the housing market, and today’s base rate cut should hopefully provide a new wave of confidence and affordability for many.
With a new government in power that is committed to delivering near two million new homes Propertymark hopes today news is a real turning point for homeowners and those who aspire to buy.”
Joe Pepper, UK Chief Executive Officer, PEXA, said that the Bank of England’s decision to cut the base rate today has offered some “reprieve” following almost a year of the highest rates in 16 years. He added:
“The latest inflation data has clearly generated enough confidence in the economy for the MPC to alleviate the strain on borrowers who we now expect to jump at the chance to remortgage.
As such, we anticipate a significant surge in activity. About 1.6 million remortgage deals are expected to expire this year, and as better deals from lenders get priced in, we will see borrowers race to secure the best rates. On top of this, Labour’s National Planning Policy Framework promises to flood the market with affordable home as early as this autumn.
All of this is good news for borrowers, but they will not feel the benefits of it because the current conveyancing infrastructure is simply not equipped to handle a significant or sustained increase in transactions.”
Tim Bannister, Rightmove’s property expert said:
“This year we’ve seen signs that more people have adjusted to higher mortgage rate levels and generally, if they can, have been getting on with moves. The property market has been resilient, and even through the uncertainty of the recent election campaign, we saw home-moving activity continue on trend. Whilst I wouldn’t expect today’s Base Rate cut to lead to a rush of activity – as mortgage rates are still high and won’t drop significantly in the short term – it is likely to have a positive impact on home-mover sentiment which bodes well for the Autumn selling season.”
Nick Hale, Chief Executive Officer at Movera, said that after months of anticipation, the Bank of England’s base rate cut today, “albeit small, is to be warmly welcomed”. He continued:
“Hopefully, this news should give the market a much-needed shot in the arm as potential housebuyers may now have the confidence to take the plunge. The market will no doubt be breathing a huge sigh of relief along with those borrowers on tracker mortgages and standard variable rates.
The cut comes hot on the heels of the General Election which should usher in a period of increased political certainty. The new Government’s ambitious housebuilding plans alone are expected to boost supply in the longer term. Our focus at Movera will be on providing fast and reliable services for those who can now look to move or remortgage this year with more confidence.”
Andrew Lloyd, Managing Director at Search Acumen, commented:
“The tide is now turning, signalling a shift in economic strategy. The Bank of England’s decision to cut interest rates today marks a significant turning point – the first base rate cut since 2020. The tide is now turning, signalling a shift in economic strategy that many hope will revitalise investment in real estate.
For investors, this rate cut offers a glimmer of hope after a prolonged period of caution. Lower borrowing costs, along with more political stability now the election news has settled, should help to stimulate activity and encourage new acquisitions, too. If rates continue to decrease, we will see increased liquidity in the market as investors reassess their portfolios in light of more favourable financing conditions.
However, it’s important to match enthusiasm with realism. While this rate cut is a positive step, the market is not without challenges and the recovery of long-term occupier demand in particular is something we may not see for some time yet.”
Anthony Coding, RBC Capital Markets, said that the first Bank Rate cut starts a “new chapter” for the housing market. He continued:
“…the worst over, the MPC believes that inflationary pressures have loosened, mortgage rates are likely to fall, and housing market activity is likely to rise. Five members voted for a 25bp cut, with four voting to hold Bank Rate at 5.25%. We believe that lenders will feel pressure to pass the Bank Rate cut onto borrowers and this could set the housing market up for a strong autumn selling season.”
One Response
The discussion that this was a tight decision, was, for me concerning. On the one hand, they seem to be worried about continuing inflationary pressures but on the other hand, inflation has dropped and consumers need to see the benefit of that. I feel that the BOE need to understand the pressures on ordinary consumers more. Yes I understand that they have to deal with inflation, but consumers, especially those on the lower end of the scale have been suffering with increase costs and mortgage payments for sometime now and need rest bite. I think the drop was always going to be gradual and over a sustained period of time but the important thing is that interests rates do drop and I hope it spurs on the market. They need to keep this going and stop punishing the ordinary person for the mistakes made solely by the rich.
In terms of the property market, I have certainly seen fewer and fewer first time buyers and investors. These are important players in the market and the sooner we get them back the better. We need to make property and mortgages more affordable.