Following the welcome news last month that headline UK inflation had fallen to the Bank of England’s target of 2%, hopes and expectations were high that today’s meeting of the Monetary Policy Committee would lead to UK interest rates being cut by 0.25% from their previous rate of 5.25%.
With so many interest rate rises since the record low of 0.1% in December 2021, there has been considerable pain for borrowers and businesses as they struggle to cope with the pain from the increased cost of debt.
However, today’s cut was clearly a knife-edge decision for the MPC. The seeds of doubt were mainly because services inflation has remained stubbornly above target, giving concern that this might fuel the inflation fire, and lead to the headline rate resuming an upward path in the months ahead.
Sharing their reaction to today’s interest rate cut news, mortgage and property professionals have been telling us what it means for the economy, for hard-pressed borrowers, for businesses and for the property market overall as follows:
Ben Waugh, Managing Director, more2life, said: “As many industry experts predicted, the market has triumphed over recent challenges, prompting the Bank of England to cut its central rate today. Naturally, this is great news for homebuyers and those refinancing residential mortgages, as borrowing costs become more affordable. Today’s announcement will likely prove a catalyst for more activity in the coming weeks and months. With a range of more affordable options now available, advisers will play a crucial role in helping borrowers cut through the noise and secure the best deal for a stable financial future.”
Kevin Shaw, National Sales Managing Director at LRG said: “The reduction in interest rates announced by the Bank of England today is good news for the property industry and the millions of people wishing to move, remortgage or get onto the housing ladder after a period of uncertainty. LRG has seen positive trading in July, with sales figures strong and an increasing number of new applicants registering. Today’s decision is a strong indication that growth is here to stay.
“There’s lot of pent-up demand in the market after months of political uncertainty and today’s decision on rates is the starting pistol that we’ve been waiting for. After a good July, we look forward to an even better August and the likelihood, in many cases, of getting people into their new homes before Christmas.”
Paresh Raja, CEO of Market Financial Solutions, said: “The base rate has finally been cut, easing the barriers that have constrained the UK property market amid two years of high inflation and borrowing costs. I expect to see increased market activity in the coming weeks as a result.
“In recent months, we’ve seen a growing sense of optimism. With property prices and the volume of homes coming onto the market on the rise, today’s decision will likely encourage investors who have been holding back to re-engage. Despite the rate cut, however, borrowing costs remain extremely high, so flexibility for borrowers and brokers remains essential.
“Therefore, any potential rebound in the UK property market will hinge on the specialist lending sector. A recent survey shows that a substantial majority of bridging lenders expect loan volumes to rise over the next year. Given the uncertainty about future rate cuts, lenders should be offering a range of product options to accommodate brokers’ and borrowers’ needs and interest rate expectations. This will help them take full advantage of the opportunities created by the rate cut, even if further rate changes do not occur immediately.”
John Phillips, CEO of Just Mortgages and Spicerhaart, said: “At long last, the Bank of England has finally made the right decision and cut the base rate. The reality is this needed to happen, not just to breathe some life into the economy, but to help take some of the pressure off borrowers – particularly those on a tracker or on SVR.
“While we may not see lenders react instantly to today’s news – as many have already priced in a cut and made reductions accordingly – it’s likely to be the starting pistol for increased competition amongst lenders. All have their own targets to hit and need to lend to make money, so it’s only right to expect greater activity as they look to increase volumes and market share.
“Today’s news will likely be the impetus for many potential borrowers or movers to return to the market and get their plans back on track. If there’s ever been a time for brokers to be proactive and present in their local community, this is certainly it. As potential clients look to navigate a changing market, that whole of market access offered by a broker is hugely valuable. It’s our job to remind borrowers of this.”
Joe Pepper, UK Chief Executive Officer, PEXA, said: “The Bank of England’s decision to cut the base rate today has offered some reprieve following almost a year of the highest rates in 16 years. The latest inflation data has clearly generated enough confidence in the economy for the MPC to alleviate the strain on borrowers who we now expect to jump at the chance to remortgage.
“As such, we anticipate a significant surge in activity. About 1.6 million remortgage deals are expected to expire this year, and as better deals from lenders get priced in, we will see borrowers race to secure the best rates. On top of this, Labour’s National Planning Policy Framework promises to flood the market with affordable home as early as this autumn.
“All of this is good news for borrowers, but they will not feel the benefits of it because the current conveyancing infrastructure is simply not equipped to handle a significant or sustained increase in transactions.”
Matt Harrison, Director of Sales for finova Broker said: “Today’s decision by the Bank of England to reduce the base rate to 5% is a welcome move for both businesses and consumers alike. In the current climate, this reduction offers much-needed relief and the potential to stimulate growth. For our members, lower borrowing costs can invigorate the market, drive more volume, and utilise technology to drive efficiencies as the market gains confidence.
“The decision along with the recent General Election marks a step in the right direction towards fostering a more resilient market. It is important now to leverage this opportunity providing reliable services to help our clients navigate the evolving financial landscape.”
Simon Webb, managing director of capital markets and finance at LiveMore, commented: “Today’s decision by the Bank of England to reduce the base rate to 5% marks a significant moment for the financial markets and the broader economy. This move, while somewhat anticipated given the recent economic indicators, is a clear signal of the Bank’s response to emerging economic challenges and their commitment to fostering a more stable financial environment.
“We welcome this decision. The reduction is poised to bring relief to older borrowers, potentially lowering the cost of mortgages and other loans, which can stimulate spending and investment. This development offers an opportunity to reassess their financial strategies and explore the many options available to older borrowers which are often overlooked.
“However, it’s essential to approach this change with a balanced perspective. While lower rates can boost economic activity, they also require vigilance in managing risks associated with borrowing and lending.”
Tony Hall, Head of Business Development at Saffron for Intermediaries, comments: “The long-expected base rate cut has finally arrived, bringing with it a boost to consumer confidence. Alongside this, we’re already seeing rising optimism, with the Bank of England noting that mortgage borrowing increased to £2.7bn in June from £1.3bn in May. However, it’s important to keep in mind that many lenders have already priced in the base rate cut on their fixed rate products.
“Despite this, it’s clear that the market is on the up, and with Angela Rayner laying out her plans to revamp the planning system earlier in the week, targeting 1.5 million new homes over the next five years, there’s an increasing amount to be positive about. As rates drop further, borrowers may be drawn to new mortgage deals, but consulting a professional financial adviser is key. They have the experience to find the best fit for your situation. The outlook for the mortgage market is very bright, with expectations of increased activity as the sector grows, and professional advice ensures you navigate this landscape wisely.”
Andrew Gething, managing director of MorganAsh, said: “This is the news that many would have been hoping for, especially those households on tracker or variable rate mortgages who will feel this almost immediately. That little bit of relief will be hugely welcome given the immense pressure that has been put on household budgets for a sustained period of time, and the impact this has on health and wellbeing, and living standards more broadly.
“Of course, we are not out of the woods just yet. Interest rates remain very high and households across the country still face difficulties. With Consumer Duty now in force across all of financial services, it’s an important reminder for firms to stay vigilant and continue efforts to identify vulnerable clients and stay close to them. Good data is absolutely essential to this.
“With the central bank now making its first move, the hope for many will be that a second cut will follow later in the year as predicted. This growing momentum will not only give lenders the platform to re-price and increase competition, but it will hopefully take the edge off strict affordability requirements which are stopping many borrowers from accessing a better deal.”
Guy Gittins, Chief Executive Officer, said: “Today’s base rate reduction will come as a welcome surprise for the nation’s homebuyers and one that will only add to the property market momentum that has been building so far in 2024.
“We’ve already seen monthly mortgage approvals sitting at consistently high levels as pent-up demand across the market has been released and, in recent weeks, mortgage rates have continued to trend downwards, with several five year fixed term mortgages available with rates below four percent.
“With interest rates now starting to fall, we only expect that these positive property market trends will intensify.”
Richard Carter, CEO of Lenvi: “Borrowers may breathe a sigh of relief as we finally start to creep back from interest rates that have been stuck fast at 16-year highs, with our latest research on consumer habits finding that four in ten (39%) borrowers listed low interest rates as their biggest priority when choosing a lender.
“Homeowners whose mortgage fix comes to an end will find they can get a slightly better deal, as lenders have already began reducing rates in anticipation of a cut.
“First time buyers haven’t had much good news, but the start of rate cuts should make their path to home ownership that little bit less arduous.
“It’s only a start, and borrowing remains expensive compared with 2021, when the Bank base rate sat at an incredibly low 0.1%. But the Bank of England’s cut to 5% reflects the improving UK economy with inflation at 2% and GDP growth of 0.7%.
“Although it was previously suggested that we’d see three interest rate cuts this year, the consensus now is for just one cut. Our 150+ lending customers are prepared for this, and are acting fast to update their rates to stay competitive and ensure they are equipped to manage an increasing demand for loans, alongside benefitting from lower funding costs. Many of our customers will likely be anticipating increased mortgage activity, as rate cuts mean consumer confidence is slowly restored in the house-buying market. Lenders will need to prepare to scale, compliantly, and to do this it’s vital that they have the correct processes and quality systems in place.”
Richard Pike, chief sales and marketing officer at Phoebus, said: “The 14 consecutive increases in the Bank’s base rate between December 2021 and August 2023 to its year-long fix at 5.25% have driven up mortgage rates tremendously with a negative impact on the UK property market and the economy.
“That the Monetary Policy Committee has now seen fit to reduce the rate is extremely encouraging for the both the property market and the UK’s economic outlook. Market sentiment has been much improved compared to this time last year.
“Things are finally looking up for originators, and we can expect to see lenders reducing existing borrower and new business rates fairly quickly. Expect competitive pricing in the market across all products moving forward.”
Jason Ferrando, CEO of easyMoney says: “Mortgage market activity has been building steadily so far this year and while today’s cut may be marginal, we can expect it to act as a shot in the arm for the sector and one that will spur more buyers to get off the fence and get on with their plans to purchase.
“What’s more, today’s cut is likely to be the tip of the iceberg and we could well see another before the year is out, which will only help to fuel market momentum further.”
CEO of Octane Capital, Jonathan Samuels, commented: “We’ve seen a far more settled landscape materialise since the base rate was held at the back end of last year and this stability has been key to the slow but steady recovery of the property market in 2024.
“However, today’s somewhat surprising decision to cut rates for the first time since March 2020 is likely to stoke the furnaces with respect to buyer demand levels and accelerate this recovery at a greater pace than expected.
“We’ve already started to see swap rates reduce in recent weeks, which suggest that mortgage rates are soon to follow, but it’s likely that many lenders will now act sooner rather than later which will help ease the cost of borrowing for the nation’s homebuyers.”
Chris Gardner, CEO, Atelier, comments: “There is no doubt that the current interest rates environment has had a painfully stifling effect on both supply and demand in our housing market. Anticipation has been building for some time about when the BoE interest rates cut would come and today is finally the day. Property developers, lenders and potential buyers will be breathing a huge sigh of relief at the news.
“On the supply side, developers have been hamstrung by the pressure of higher costs for financing developments, slowing down the completion of schemes and their profitability. On the demand side, high interest rates have kept prospective buyers off the property ladder for longer. This housing market stasis has been frustrating to say the least.
“Today’s interest rate cut will offer much-needed relief for the market. It is the catalyst we have been looking for to get the property market moving again.”
Nick Hale, Chief Executive Officer at Movera, said: “After months of anticipation, the Bank of England’s base rate cut today, albeit small, is to be warmly welcomed. Hopefully, this news should give the market a much-needed shot in the arm as potential housebuyers may now have the confidence to take the plunge. The market will no doubt be breathing a huge sigh of relief along with those borrowers on tracker mortgages and standard variable rates.
“The cut comes hot on the heels of the General Election which should usher in a period of increased political certainty. The new Government’s ambitious housebuilding plans alone are expected to boost supply in the longer term. Our focus at Movera will be on providing fast and reliable services for those who can now look to move or remortgage this year with more confidence.”
Arjan Verbeek, CEO of Perenna, said: “Many will be rejoicing that the base rate has finally experienced its first cut since hikes began in December 2021, but in reality, consumers will soon feel shortchanged as they still won’t be able to access affordable mortgage products.
“Affordability is not actually linked to the headline mortgage rate on traditional mortgage products – but to the reversion rate or Standard Variable Rate (SVR). This is why we have an affordability crisis. So regardless of which way the market moves, unless the SVR reduces, we aren’t going to enter a promised land of extensive home ownership. The problems are systemic.
“Want real change? Let’s start innovating and get other types of mortgage products on the market which not only help hardworking families onto the ladder but also protects them from economic shocks.”
Aaron Milburn, UK Managing Director at Pepper Advantage, said: “Today’s rate cut will be extremely welcome news to borrowers, especially those that are struggling and the millions of homeowners set to refinance in the coming months. It will also help stimulate demand for new originations, which grew in Q2 to the highest levels since 2022.
Q2 data from our loan portfolio shows the strongest reasons yet for optimism, with UK residential mortgages arrears down for the first time since the 2022 mini-Budget, but it is too early to celebrate. Some customer groups – notably buy-to-let mortgage holders – are showing warning signs, with buy-to-let arrears up 11% in Q2 compared to Q1.
Moreover, there will be a lag before borrowers feel the benefits of this cut and the impact of slightly lower rates on monthly repayments is likely to be modest. Despite today’s action, there is still a long way to go in the UK’s transition from a higher-rate environment.”
Jatin Ondhia, CEO of Shojin Property Partners, said: “The consecutive months of target level inflation were clearly enough for the Bank of England to finally give the green light to reduce interest rates. The decision is a key indicator of the growing sense of economic stability and will likely open up new opportunities for investors as they reassess how to manage their portfolios.
“The impact of the high inflationary-high interest environment of the last couple of years cannot be underestimated. Homeowners have faced higher mortgage rates than at any point since the financial crisis, while developers have found it harder to access much-needed finance. Today’s decision hopefully signals a clear transition away from this challenging period.
“Looking ahead, alternative investments are likely to play an increasingly important role in investors’ portfolios. While the base rate has now fallen, it’s from a 16-year high – interest rates still remain significantly above the levels that many landlords had become accustomed to before the hikes. As such, diversification will remain a prominent trend going forward, with a balance of savings products and lower-risk investments alongside higher-risk opportunities to provide potential for greater growth.”
Ben Nichols, Interim Managing Director at RAW Capital Partners, said: “The Bank of England clearly feel as though the perils of high inflation have been addressed by their action on interest rates and the rate hiking cycle has finally come to an end, allowing homebuyers, investors and BTL landlords alike to take a breath and plan their strategies with greater confidence and freedom. After rates reached their highest level in 16 years, today’s decision will provide much-needed relief, and I expect to see an uptick in activity in the UK property market as a result.
“Recently, sellers have flocked to put their properties on the market, and estate agents have noted an increase in buyer demand. What’s more, official figures show that house prices have grown for three consecutive months, while mortgage approvals have held steady near their highest level in 18 months. This indicates that the market was stabilising well before today’s rate cut. In this context, the additional impetus from the MPC today is likely to encourage hesitant investors and buyers to resume their investment plans.
“However, while we can celebrate a rate cut after two years of hikes and pauses, it is important to remember that rates are still very high in comparison to where they have been in recent memory. For a surge in activity to materialise, brokers and their clients must be equipped with the tools they need to confidently execute their investment plans. Lenders must recommit to offering a wide range of bespoke and flexible financial products to support the property market’s continued recovery.”
Kevin Roberts, Managing Director, Legal & General Mortgage Services, commented: “After four years, a cut to the central rate is a significant milestone, bringing with it a new and promising chapter for the property market. Lenders have already been lowering product rates in recent weeks based on long-term forecasts, putting us on course for 1.1 million sales this year. Confidence and excitement around the market has been building, and today’s decision could be the catalyst for consumers to push ahead and get their home moves over the line.
“If you are weighing up a move following today’s decision, a professional mortgage adviser can cut through the noise and help you navigate a complex market. Enlisting the expertise of someone with years of industry know-how is your ticket to making a decision you can be confident in. And while it might not be something typically on your radar, advisers can unlock exclusive products that would otherwise be out of reach.”
Paul Glynn, CEO, Air, comments: ‘’Today’s base rate cut to 5% is one which will be welcomed by many, providing a much-needed boost to consumer confidence as we head towards the Autumn Budget. However, many lenders had already priced the cut into their fixed rate products ahead of time, so this won’t result in any immediate downward pressure on mortgage rates more broadly.
“The market is steering towards a more manageable economic climate, but there are still difficulties that lie ahead for borrowers that aren’t going to disappear immediately. Asking prices are nearing record high levels and the reality is wage growth hasn’t gone nearly far enough to keep up. Later-life lending, which is affected by gilts, presents one possible solution for older homeowners who may have to manage mortgage repayments in retirement. Engaging in conversations with consumers on working solutions, including later-life lending, at an earlier stage must become the norm to secure good customer outcomes.”