Borrowers will breathe a slight sigh of relief now the Bank of England has moved to cut the base rate for the second time this year.
The base rate fell from 5% to 4.75% following an 8 to 1 vote in favour of a reduction, and this marks the first time in 18 months the rate has been below 5%.
Here’s how the industry reacted.
More moderate rate cuts expected
Matt Smith, Rightmove’s mortgage expert, said: “This base rate decision comes at the end of a run of important macroeconomic and political events on both sides of the Atlantic.
“All of this has resulted in a view that base rate will be cut at a more moderated pace than previously expected and has been priced in by lenders.
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“Therefore, we are likely to see average mortgage rates drift up a little in the short term, before starting to fall back again.
“Today’s decision will probably help relieve pressure on lenders to increase rates as we had started to see. If the last few weeks [have] taught us anything, it is that the UK mortgage market remains competitive, but headline pricing will continue to be impacted by events both in the UK and overseas.”
Andrew Gething, managing director of MorganAsh, said: “While some may have been worried about the impact of the Budget on a potential rate cut, the fall in headline inflation was clearly enough for the central bank to make its move – as widely predicted.
“The Budget and changes to both government borrowing and the UK tax burden are more likely to impact the frequency of future decisions. There’s no question that the MPC will want to see… how this all plays out – as well as carefully watch activity abroad in the States and the Middle East, for example.”
James McManus, chief investment officer at wealth manager Nutmeg, said: “This decision was expected by the market, but the timeline for future cuts has changed significantly over the past fortnight. The significant increases to government spending set out in the Budget as well as a rise in wages, underpinned the OBR’s forecast for elevated inflation next year.
“It means a further cut before Christmas is now uncertain and markets expect only two more cuts of 25bps by September 2025, down from three at the previous meeting in September. We expect the bank will remain data dependent, but recent events will likely make policymakers think twice about the cadence of the rate-cutting cycle.”
Impact on older borrowers
Simon Webb, managing director of capital markets and finance at LiveMore, said: “This is encouraging news for older borrowers. For those aged over 50 who often face unique financial considerations, this rate cut could ease monthly repayments.
“Combined with measures from last week’s Budget, such as a 4.1% increase in the state pension from April 2025, today’s decision can enhance financial stability for the older generations and help with affordability and choice in the mortgage market.”
Boost for second charge market
Ryan McGrath, director of second charge mortgages at Pepper, said: “Today’s interest rate cut, although widely anticipated across the market, may be the incentive many homeowners need to press on with house moves or home improvement projects.
“With demand for affordable and flexible financing solutions rising to fund loft extensions or kitchen overhauls, today’s rate adjustment offers new opportunities for homeowners to manage costs effectively while preserving their primary mortgage rate.
“This demand from homeowners has led to impressive growth within the second charge mortgage market – expanding by 17% year-on-year in the first half of 2024 – outpacing all other lending segments, including first-time buyer lending.
“While both the UK and international markets adjust to global events, the second charge mortgage market is showing its formidable resilience, poised to support homeowners by providing flexible and affordable options to meet evolving economic conditions.”
