Today, the Bank of England (BoE) cut the base interest rate to 4.25%, delivering a boost for borrowers.

The quarter-point rate cut is the second of 2025, with more expected to follow later this year.

Looking forward

Financial forecasters predict interest rates will continue to fall due to several deflationary factors.

The first is the falling price of oil (it’s currently at a four-year low).

Then there’s Trump’s tariff war. This could see China re-route goods to other consumer markets, such as the UK, further pushing down prices here. (Although let’s face it, no one’s really sure what the final shape of this policy will be.)

Morgan Stanley predicts the base rate could hit 3.25% by the end of 2025 and reach 2.75% by mid-2026.

Impact on mortgage rates

The BoE base rate influences the interest rate banks and building societies offer savers and borrowers.

So, while today’s decision won’t be music to the ears of savers, it’s a different story for mortgage holders or those looking to buy property.

Those on tracker rates should immediately notice the difference in their monthly payments.

Homeowners on fixed rates will benefit from lower rates when they come to renew their deal.

And people planning to invest in property should be able to negotiate a more affordable mortgage.

Acting in anticipation of today’s cut, HSBC dropped its rates last week so that all its products now fall below 5% for the first time since 2022.

Buyers with substantial deposits may be able to secure a deal at below 4%.

Market activity

In general, lower interest rates boost activity in the property sector.

It makes borrowing more affordable for buyers, increasing the number of players in the market. This, in turn, means a larger pool of potential buyers for sellers to choose from, driving up competition (and often value).

If you’re looking to buy or sell in the coming months, contact us. We’re here to help.

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