Base rate cut to 4% – experts respond

Interest Rate decision: “blessed relief to mortgage borrowers

Ryan Etchells, Chief Commercial Officer at specialist property lender Together, said: “The 0.25% cut to the base rate will offer blessed relief to mortgage borrowers as lenders are expected to drop their mortgage prices over the next few weeks. Following a period of stagnant house price growth in the wake of the end of the stamp duty holiday in April, we are expecting market activity to ramp up considerably now as more individuals and businesses take advantage of lower rates.

“That being said, it remains to be seen whether today’s move will put enough wind in the sails to continue the optimism we have seen in the housing market over the past few months. Stubbornly high inflation makes the prospect of another cut in the near future slim, and also eats away at consumer savings. With the Chancellor reportedly lumbered with a £50 billion black hole in UK public finances, we may see a spike in activity in the market before potential tax rises in the Autumn Statement ruin the summer party for the property industry.”

Ben Thompson, Deputy CEO, Mortgage Advice Bureau:

“The Bank of England’s latest rate reduction will provide even more incentive for aspiring homeowners to step onto the property ladder. It was already a good time to buy, but this latest move makes it even more attractive. Lenders are continually adjusting their criteria, and it’s increasingly possible to borrow more than you could last year, opening up the mortgage market significantly.

“However, we recognise a major challenge: many potential borrowers simply aren’t aware of the full spectrum of mortgage options available to them. Our research reveals that 27% of renters believe they’ll never be able to afford their first home – a figure we’re determined to change.

“While we’ll have to wait and see if another rate cut is on the horizon before the year ends, the message is clear: if homeownership felt out of reach to you before, today’s climate offers a significantly stronger chance. With the expert guidance of a mortgage adviser, I strongly encourage aspiring buyers to take full advantage of the market and unlock the considerable financial benefits and long-term security that homeownership offers.”

Alpa Bhakta, CEO of Butterfield Mortgages Limited, said: “Today’s rate cut will be welcomed by the Prime Central London (PCL) market. 2025 has been a challenging year so far and lower rates will help to boost borrower confidence. That said, many investors remain cautious and are seeking greater stability before committing to their investment plans. Lenders need to continue providing the tailored support and transparency required to navigate the market and maintain momentum.”

Paresh Raja, CEO of Market Financial Solutions, said: “Inflation might remain above the 2% target, but a softening labour market and sluggish economic growth mean the Bank of England is justified in taking this action. More of the ‘wait-and-see’ approach looked like doing more harm than good, and this is likely to provide the UK property market with a real boost.

“Borrowers might not see an immediate changes. After all, the markets had been expecting this cut for some time, and many lenders have already reduced their rates in preparation. But every cut will be welcomed and will undoubtedly help to unleash pent-up demand, driving increased activity in the coming weeks, particularly during the typically busy period as the summer holidays draw to a close.

“Lenders need to remain proactive in the final five months of the year. The expectation is for more base rate reductions, so product repricing and flexible lending solutions are essential for supporting borrowers and their brokers. Today has brought some good news, and it’s vital the property market can capitalise on it.”

Hamish Martin, Partner at LAVA Advisory Partners, said: “Today’s decision is a welcome step forward in this cycle of cautious easing, and might spell the start of open season for dealmakers after a lengthy period of elevated borrowing costs. Lower financing rates are likely to reanimate both private equity and corporate acquirers across a broad range of sectors, which is especially good news for rate-sensitive industries like real estate, consumer, and industrials.

“While inflation is still above the 2% target and growth is still sluggish, today’s move is a starting pistol that should help revive deal pipelines that have stalled due to the cost of capital. With August traditionally quiet, I think we’ll see the real benefits come September, when holidays are over and everyone’s back to work and pushing for a strong end to the year.”

The BoE needs to cut further than the market has been expecting

Commenting on the latest UK inflation figures, Neil Wilson, Investor Strategist at Saxo UK says: “It’s about time the Bank got on with it.  A cut was a done deal, but the question now is how far does the Bank of England go – while today’s cut was easy, it gets harder from here.

Our inclination is that the BoE needs to cut further than the market has been expecting, perhaps as low as 3%, vs the 3.5% priced ahead of this decision. Demand-driven inflation is not really the issue as tax hikes will continue to squeeze spending.

The calculation for the Bank is not straightforward – but it seems right to err on the side of caution given the precarious economic outlook and fiscal situation.

Unemployment has risen above the Bank’s forecasts and growth is weaker. Latest data for June showed the unemployment rate rose to 4.7% in the three months to May, the highest level since June 2021.

But services inflation, a key one for the BoE, remains stubbornly high at 4.7%. That is above even the quite level expected by the BoE coming into the autumn. Headline inflation has also ticked up to 3.6% but the BoE was anticipating inflation to pick up through the year.

Governor Andrew Bailey gave a strong signal to the market two weeks ago by saying that he believes “the path is downward” on rates.

On the whole, while we favour the Federal Reserve seeing inflation further away from target than employment, the Bank of England is on the other side with the labour market and slowing growth the key concerns. It is also no doubt fully aware that tax hikes are coming, which will further squeeze the economy, jobs and spending power.”

The Rate Cut May Feel Good, But Premature in Our Opinion

Lale Akoner, global market analyst, says: “Markets may cheer a fifth rate cut today, but in our view, it’s too early to declare victory over inflation. The economy is clearly slowing, and jobs are becoming harder to find but the inflation pulse remains stubbornly strong, especially in services and wages.

“Second-round effects from past price spikes are still working their way through the system. Prices, particularly for consumer essentials, are nowhere near target levels, and consumers continue to feel the strain at the checkout. Wage growth remains elevated, and inflation expectations are at risk of becoming entrenched. That’s why today’s expected cut feels premature to us.

“A slower, steadier approach would better serve the long game. Central banks like the ECB and Fed may be tilting dovish, but that’s no reason to rush in the UK where stagflationary risks are higher. The UK’s labour market is already absorbing pain, with over 180,000 payrolls lost since April’s tax and wage hikes.

“Investors may welcome today’s move, but a November cut is far from guaranteed. From here, the path will likely be uneven. Credibility matters and getting this wrong could cost more in the long run.”

George Lagarias, Chief Economist at Forvis Mazars comments: “While the rate cut was fully priced in by financial markets, the number of hawks on the MPC (4) is somewhat of a surprise. Inflation may have picked up, but employment and growth conditions are deteriorating fast enough for many economists to assume that prices will eventually be pushed down as well. What will today’s move mean for consumers going forward? That there’s enough resistance in the Bank of England towards sharper cuts, for rates, and thus mortgages, to remain elevated for some time.”