The Bank of England has cut interest rates for the third time in just under a year.

Policymakers at the Bank have opted to reduce interest rates to 4.5% today.

Rates sat at 4.75% after being cut by 0.25% in November 2024. They were then kept the same in December.

But there was a notable difference of opinions among the nine-member committee making the decision on rates.

While seven voted for a cut from 4.75% to 4.5%, two wanted a bigger cut to 4.25%, reflecting growing uncertainty for the UK economy.

The decision to rate the rates could lead to cheaper borrowing costs for things like mortgages and loans, but also lower returns on savings.

 

Industry reaction: 

Dominic Agace, chief executive of Winkworth, said: “It’s a welcome move. We hope this will ensure the early momentum of this year continuing, where we saw the level of applicants registering 16% ahead of January last year, as people look to crack on with their lives after a year of elections.”

 

Paul Hardy, managing director of LSL Estate Agency Franchising, commented: “Although widely anticipated, this is good news for home buyers and anyone remortgaging in 2025. Every saving on a mortgage repayment helps confidence and this helps the property market as a whole. 2024 was positive and 2025 has started well for our franchise partners with strong buyer interest and good sales levels.

“The drop in the interest rate will serve – in the short term at least – to reassure buyers’ and homeowners, especially as we head towards the 1st April Stamp Duty increases. However, for as long as there remains uncertainty over the stability of the economy, further interest rate drops in 2025 cannot be taken for granted. We will proceed with cautious optimism, hopeful that the market will continue positively.”

 

Nick Leeming, chairman of Jackson-Stops, commented: “While the Bank of England’s decision may not have been a surprise, it will certainly be welcomed. With expectations that there will be a series of incremental cuts to the base rate this year, this is a vote of confidence from the Bank of England in the markets more widely.

“While some economic volatility continues to weigh on the minds of decision makers, the government’s staunch commitment to boosting growth alongside the ECB recently cutting rates – and the Fed expected to do the same – made the Bank of England’s decision a necessity.

“For buyers and borrowers, any cut to the base rate is a positive step, however the trickle down to mortgage rates may not be so immediate. There remains lots for prospective buyers to be positive about. Inflation is much lower than a year ago and the tide has now turned on interest rates, which will ease affordability in the mid- to long-term. We are still seeing a strong level of commitment to the market and sales progressing at the end of last year with confident pricing. We expect activity levels to persist with stamp duty changes in March motivating quick completions.”

 

Amy Reynolds, head of sales at Antony Roberts, said: “A rate cut helps the housing market hugely as it gives borrowers an affordability boost, filtering through to lower mortgage rates, which encourage activity.

“The Bank of England was widely expected to cut rates this month, and with borrowing costs remaining high compared to the pre-2022 norm, this is a welcome move.

“The stamp duty holiday has helped transaction levels with an increase in sales agreed in those chains where there is a first-time buyer keen to take advantage of the discount before the end of March. While this has been welcome, there is concern that once the stamp duty holiday ends, there will be a dip in activity and transactions, which is why this rate cut is so important.”

 

Iain McKenzie, CEO of The Guild of Property Professionals comments: “While inflation is still stubbornly sitting above the target, it was not enough to keep the Bank of England from cutting the rate. Today’s decision, as well as further rate cuts expected throughout 2025 should help to improve affordability, which in turn will attract a broader range of buyers to the market.

“Rates are forecast to drop to around 3.75% by the end of the year. Although much of this has already been priced into fixed mortgages, there could be some further downward shifts in these rates. This would be welcomed by those looking to move or those who will be remortgaging this year.

“While changes to stamp duty thresholds will have an impact on the market, it is expected that we will see a modest improvement for both the economy and the housing market in 2025. The economic backdrop has set the stage for steady market activity and moderate price growth throughout.”

 

Jeremy Leaf, north London estate agent, stated: “The bank rate cut has been widely expected though its impact on the housing market is unlikely to be significant, at least immediately.

“However, confidence is vital to improving activity, not just when it comes to buying and selling houses but the wider economy, and even a small reduction is welcome.

“The housing market certainly needs a shot in the arm as many have been taking too long over decisions, although demand has certainly picked up since the stat of the year.

“On the plus side, in our offices we haven’t seen transactions failing or heavy renegotiations, with most sales proceeding – albeit sometimes painfully slowly.”

 

Richard Donnell, executive director of Zoopla, remarked: “Today’s cut to the base rate will provide a boost to market sentiment for home buyers, more than a boost to buying power.

“The path of base rates is already priced into fixed-rate mortgages which account for the majority of new mortgages. It’s positive that 2025 is starting with lower mortgage rates than the last two years. The average 5-year fixed rate at 75% LTV is 4.4% while a two-year fix is at 4.6%.

“Greater stability in borrowing costs has brought more buyers and sellers back into the housing market having delayed moving decisions as rates spiked higher.”

 

Colby Short, co-founder and CEO of GetAgent, commented: “The move to lower interest rates is no doubt the right one as inflation levels have remained broadly stable for some months now.

“We’ve already seen the mortgage industry react positively in anticipation of today’s news, as swap rates have fallen and many lenders have moved to lower the mortgage rates on offer.

“So whilst the property market may currently be benefiting from a minor surge in activity ahead of April’s stamp duty deadline, today’s decision should act as a further shot in the arm, although we expect the long-term picture to be one of more measured growth, with market momentum building gradually as the picture continues to improve.”

 

Verona Frankish, CEO of Yopa, said: “Despite the fact that interest rates haven’t fallen at the speed we expected, we’ve seen a strong and consistent level of buyer activity sweep the property market over the last year and, with a further reduction today, we expect this to remain the case as we look to the year ahead.

“Of course, mortgage rates currently remain far higher than today’s home movers have become accustomed to in recent years and so a degree of caution is advisable. However, we’re already seeing lenders react positively by reducing rates and we expect the picture to continue to improve over the course of the year where mortgage affordability is concerned.”

 

Jonathan Handford, MD at Fine & Country, added: “Today’s announcement marks a pivotal moment for the housing market and, more importantly, a significant step forward for first-time buyers on the path to homeownership.

“The first interest rate cut of 2025 paints an optimistic picture for the year ahead and should provide a much-needed confidence boost for prospective buyers. Lower rates are likely to push lenders to reduce mortgage costs, and have the potential to trigger a ‘rate war,’ with banks and lenders slashing rates to remain competitive.

“While the housing market experienced steady growth last year, affordability remains a hurdle for many. However, with interest rates continuing on a downward trajectory, previously hesitant buyers — especially first-time purchasers — may see this as the right moment to step onto the property ladder.

“In addition, the upcoming April deadline for changes to the stamp duty threshold — which will be lowered considerably — has also been propping up the market in recent months. Mortgage approvals in the UK rose unexpectedly in December, as buyers sought to beat the upcoming changes. This combination of lower interest rates and shifting tax policy may further accelerate decision-making among those looking to get their foot on the property ladder.

“Looking ahead, while CPI inflation slowed to 2.5% unexpectedly in December — nearer to the Government’s 2% target — the level of core inflation in the UK currently sits at 3.2%. Inflation will play a crucial role in determining the pace of future interest rate cuts. It also affects how much buyers are able to save for a deposit, so it’s crucial that we don’t see a surge.

“The Government and the Bank of England will need to strike a delicate balance — ensuring borrowing remains affordable while keeping inflationary pressures in check.

“The housing market’s trajectory in 2025 will be shaped by the interplay of lower interest rates, shifting fiscal policies, and broader economic conditions. If lenders aggressively lower mortgage rates, we could see heightened competition among buyers, driving short-term demand and pushing house prices up.

“Today’s rate cut could be the catalyst for a more dynamic and accessible market in the months ahead.”

 

More lenders drop mortgage rates as product choice improves