The Bank of England (BoE) has voted to lower the base rate by 0.25% to 4.50%.

This follows the Monetary Policy Committee’s (MPC) decision to hold the base rate in December, after the initial move in November to reduce the rate to 4.75%.

This marked the first time it had fallen below 5.00% since rates were raised above that level in June 2023.

The latest cut is aimed at supporting economic growth as inflation continues to slowly decline, recently dropping to 2.5% from a peak of 11.1% in October 2022.

Reaction:

Nicholas Mendes, mortgage technical manager and head of marketing at John Charcol:

“The Bank of England’s decision to cut the base rate by 0.25% to 4.5% reflects growing concerns over the UK’s sluggish economic growth.

“With GDP flatlining for the past six months, demand remains weak, and lowering borrowing costs should help to boost investment, consumer spending, and business confidence.

“While headline inflation has unexpectedly fallen to 2.5% in December, wage growth remains stubbornly high at 5.6%, and weak productivity raises the risk that inflationary pressures could re-emerge if demand picks up too quickly.

“This move also comes at a time of uncertainty in global trade, particularly with Donald Trump’s trade policies threatening fresh tariffs and potential supply chain disruptions.

“While the UK may not face direct levies, a weaker pound could push up the cost of imports, adding to inflationary pressures.

“Markets have already responded, with UK Government bond yields falling, reflecting expectations that further rate cuts may follow if economic growth continues to falter.

“This decision marks a shift in the Bank of England’s priorities, placing more emphasis on supporting the economy rather than solely focusing on inflation.

“The challenge now is to strike the right balance providing the necessary stimulus without allowing inflation to creep back up, particularly as global economic uncertainty remains high.

“The Bank’s next moves will depend on how wage growth, productivity, and broader economic conditions evolve in the coming months.”

Adrian MacDiarmid, head of mortgage lender relations at Barratt Redrow:

“We expect that this latest cut- which follows the reductions we saw last summer- will prompt some lenders to lower mortgage rates.

“This is great news for both existing homeowners and buyers, offering a welcome sense of stability in what has been an unpredictable market.

“One other thing for buyers to be aware of is the change in Stamp Duty thresholds, which will come into effect from 1st April.

“These could make a significant difference to affordability for first-time buyers through to next-steppers and downsizers and we would encourage anyone looking to purchase a property to act fast to beat the Stamp Duty rise.

“As well as taking into account today’s interest rate cut when considering affordability, buyers can scan the market to look at the many competitive offers on the table from new build developers.

“For example, Barratt Homes and David Wilson Homes are part of a scheme called Own New Rate Reducer, which enables buyers to reduce the rate they pay rates from as low as 1.66%, significantly reducing their monthly payments in the early years of the mortgage.”

Terry Higgins, mortgage expert and group MD of TNHG New Build Mortgages:

“A lower Bank of England base rate generally means cheaper borrowing costs.

“For UK homeowners who are on a variable or tracker-rate mortgage, these cuts could lead to lower monthly repayments.

“This could also benefit anyone purchasing a property if lenders pass on the reduction, helping to make the property ladder more accessible for future homeowners.

“Buyers could potentially borrow more due to improved affordability.

“For those due to remortgage, it’s a good idea to closely track upcoming rate forecasts as these could be cut further down throughout the year.

“By switching to a mortgage with a lower interest rate, homeowners can reduce their monthly payments further or shorten the term of their loan, potentially saving thousands over the long run.”

Justus Brown, CEO of Acre:

“With many signals flashing that the UK economy has already slowed, and tax increases for employers coming in in April, bond rates seem to have peaked and the Bank of England has now cut rates.

“Even after the Stamp Duty Holiday ending in March (which is more of a benefit for anyone outside of London), the lowered long term interest rates mean we can expect to continue to see strong mortgage demand as those looking to lock in better rates as their existing deals come to an end.

“Remortgage business is set to grow by 30% and hit £76bn this year, according to UK Finance, while the product transfer market is also on track to grow, albeit at a smaller 13%, to reach £254bn.

“For mortgage brokers, who may have found that January was a record-breaking month (it was for Acre) there’s no signs of workload relief. 

“Demands is likely to remain high past March.”

Alpa Bhakta, CEO of Butterfield Mortgages Limited:

“With Monetary Policy Committee decisions being the most significant driver of market sentiment, today’s rate cut should precede more activity as borrowing cost becomes lower.

“That said, challenges remain, and as lenders we must continue to provide flexible solutions and bespoke support to ensure brokers and property investors are well-positioned to thrive as the economic outlook improves.”

Paresh Raja, CEO of Market Financial Solutions:

“Today’s decision was widely expected, and there’s been plenty of evidence of lenders changing their rates over recent weeks ahead of the base rate being cut.

“But it is another positive step nonetheless, and it will likely bring more buyers into the market.

“As ever, no sooner has the Bank of England delivered one decision than speculation begins about when it might cut the base rate again.

“The forecasts still suggest there could be anything between one and three further drops this year, but such predictions are sensitive to other trends, such as the performance of the economy and the rate of inflation.

“For now, the focus from lenders and brokers has to be on taking a pragmatic, responsive approach, ensuring they support borrowers as best they can, particularly if a wave of new prospective buyers and investors does enter the market.”

Article sourced from https://theintermediary.co.uk/2025/02/bank-of-england-cuts-base-rate-to-4-50/?utm_medium=email&utm_source=rasa_io&utm_campaign=newsletter

Mc Daid Mortgages do not accept responsibility for any advice provided or opinions expressed with this article. This is for information purposes only

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