The Bank of England has cut interest rates for the second time this year as expected.

Policymakers at the Bank have opted to reduce interest rates to 4.75% today.

Rates sat at 5% after being cut by 0.25% points in August, the first reduction since 2020. They were then kept the same in September.

Bank of England governor Andrew Bailey offered reassurance, saying it was “likely that interest rates will continue to fall gradually from here”.

But the Bank’s new quarterly forecast suggests that it considers last week’s Budget to have added to inflationary pressures, in a way that will slightly slow the pace of these rate cuts.

Bailey cautioned: “We need to make sure inflation stays close to target, so we can’t cut interest rates too quickly or by too much.”

Industry reaction: 

Iain McKenzie, CEO of The Guild of Property Professionals, commented: “While it will be some time before we establish the long-term impact of the budget on interest rates, today’s decision to cut the rate will be a welcome sentiment boost for the property market.

“Although the broad path of mortgage rates has been trending towards lower rates, over the past few weeks it has not been as clear cut. While some lenders have continued to drive new business with competitive rates, others have pulled back a little and adjusted their rates upwards. Hopefully today’s decision will influence more lenders to be more competitive with their offerings.

“While property market activity remained robust ahead of the Autumn Budget, the number of new properties reaching the market and the time taken to sell are both rising, leading to a boost in available homes for sale. Supply has reached its highest level since 2014, giving buyers more choice. As the market shifts to favour buyers, sellers will need to recognise the continued price sensitivity and price competitively to achieve a sale.”

Matt Thompson, head of sales at Chestertons, said: “With inflation below 2%, it was almost certain that the Bank of England would cut interest rates today. This is welcome news for house hunters who will now feel more motivated to resume their search. We predict the boost in buyer confidence to result in the property market being busier than expected for this time of year.”

Jeremy Leaf, north London estate agent, said: “Of all the factors influencing home-buying decisions, economic prospects and direction of travel for interest rates in particular have most impact.

“Today’s reduction will certainly give a kick to those sitting on the fence who are undecided about whether to stick or twist, coming on top of other recent positive housing market data.

“There’s more choice of stock now than a few months ago, so sellers need to remain competitive if wanting to take advantage of inevitable improved  buying power as longer-term affordability concerns persist too.

“First-time buyers especially are looking to gain not just properties from investors withdrawing from transactions due to their higher stamp duty liability announced in the Budget but their own obligation to pay more of the tax from next April.”

Nathan Emerson, CEO of Propertymark, commented: “Today’s announcement will be welcome news for buyers, especially for those who may have been delaying any house move due to potential uncertainty on their overall affordability. With the Bank of England’s most recent Money and Credit Report revealing net mortgage lending has further increased by 0.9 per cent in September, up on the 0.7 per cent seen in August, coupled with proposed changes to Stamp Duty thresholds from next April, it’s highly likely we may see buoyant activity in the market across the winter months.”

Nicky Stevenson, managing director of Fine & Country, said: “As we head into the final months of the year, market conditions are looking favourable, with today’s decision to cut the rate likely to further boost confidence in the market.

“While there was some nervousness in the lead up to the Autumn Budget, activity levels remained robust and should start to build with much of the uncertainty now in the rearview mirror.

“Mortgage approvals increased for the fourth consecutive month, reaching 65,647 in September, a level not seen since August 2022. Relatively lower mortgage rates have been helping to boost sales, and today’s cut will be the jab in the arm the market needed as we head into the traditionally quieter Christmas period.

“The good news is that inflation seems to have been reined in, rising by 1.7% in the year to September, down from 2.2% in August. The OBR expects that inflation will remain around the target 2% until 2029.

Nick Leeming, chairman of Jackson-Stops, remarked: “A second base rate cut this year is welcome news. While a 0.25% cut is a small milestone in the march back to a mortgage-friendly borrowing environment, it signals confidence from the Bank of England which will reassure buyers and encourage them to continue their property search or purchase.

“Following the initial market volatility from the chancellor’s Autumn Budget announcements and the loosening of fiscal rules, the Bank’s actions show it is taking a long-term view of the UK’s economic outlook with improvements anticipated on the horizon. With inflation falling faster than expected, there’s confidence to proceed with rate cuts. Economists predict a quarterly rate-cutting rhythm during 2025, which should translate into further reassurance for homebuyers looking to flex their borrowing power to upsize or relocate.

“For buyers and sellers alike, the bigger drag on confidence and activity remains a lack of available housing stock. Competition remains fierce in areas where affordable property is scarce, and it’s been the elephant in the room for successive Governments.

“The chancellor told us nothing we didn’t already know by acknowledged the UK’s housing crisis, but the repeated commitment to delivering 1.5 million new homes within the Parliament would make a tangible difference. However, until planning is reformed, and building begins at a grander scale than we’ve grown accustomed to, the market will remain locked in a supply-and-demand tug of war.”

Amy Reynolds, head of sales at Antony Roberts, noted: “It’s a significant week for the property market with the Budget, the US election, and now the Bank of England’s interest rate decision.

“The August rate reduction boosted buyer confidence, leading to an uptick in applicant registrations, viewings, and offers, contributing positively to our fourth quarter revenue. A further rate drop would likely encourage more vendors to sell and buy, helping to ‘get people off the fence.’ With likely further reductions throughout next year, this should provide stability, giving people the confidence to plan, which is essential for maintaining market momentum.

“With the Budget behind us, we now have greater certainty. Homeowners without second homes may feel encouraged by a rate drop, though those with holiday homes or rental properties may wait for further rate cuts before re-entering the market.

“We are cautiously optimistic but concerned about the future stamp duty rate change for first-time buyers. Do they realise how long it takes to complete a purchase? If the mortgage market reacts positively to today’s reduction, first-time buyers should seriously consider making their move to agree a purchase before Christmas, as delays could prove costly.”

Guy Gittins, CEO of Foxtons, added: “Whilst homebuyers will have been disappointed about the lack of a stamp duty relief extension in last week’s Autumn Budget, news today that interest rates have been cut will certainly help to boost their mood.

“The UK property market has already been showing strong signs of recovery in 2024 and this has been driven by improving market sentiment as a result of a more stabilised lending landscape.

“We also tend to see a wave of new buyer interest following a cut to interest rates, as those previously priced out of the market re-enter the fray and so today’s news will no doubt entice more buyers to make their move.

“With a stamp duty deadline now looming, we expect to see a supercharged level of market activity in the coming months as buyers look to complete before 1st April next year. Today’s decision to cut rates will only help add to this increased momentum and we now look set for a very strong end to the year and an even stronger start to 2025.

“There currently remains a good level of stock on the market, so whilst demand is set to climb, it’s unlikely to drive house prices to the same extent as it would in an under supplied market.”