What could a shift in the UK base rate mean for property owners: mortgage broker shares insight ahead of Thursday’s announcement

The Bank of England is likely to maintain its current interest rate of 4.5% later this week, according to a Reuters poll of 61 economists. 

The decision to keep the rate on hold is largely due to the ongoing uncertainty surrounding US president Donald Trump’s trade tariffs, as well as impending UK tax increases. 

That being said, nothing can be guaranteed until the decision is officially announced on Thursday by the Monetary Policy Committee, when existing property owners, those looking to remortgage, and first time buyers hoping to take their first steps onto the property ladder will no doubt be paying close attention. 

Below, Joseph Lane, Founder and Director of award-winning brokerage Mortgage Lane, shares insights on the possible impact of a rise or drop in interest rates later this week, as well as how it could affect groups differently:

“Despite the popular consensus among financial experts that there will be no change to the base rate this week, there are numerous examples from months and years gone by to highlight that predictions can often be misjudged. It’s therefore wise for current and hopeful property owners to be aware of how a shift may impact their own personal and financial circumstances.

“Generally speaking, a cut to the base rate on Thursday could stimulate the property market, increasing demand from buyers, with the possibility of house prices going up. On the other hand, an increase of the rate may slow down transactions, cause reduced affordability, and lead to a stagnation or reduction in average house prices due to weakened demand.  

“For first time buyers hoping to purchase their first home this year, a drop in the base rate could lead to high street lenders further decreasing their mortgage rates, resulting in lower monthly payments and increased affordability. However the risk of increased demand potentially driving up the value of house prices may well offset the benefits of these lower rates for those only just beginning their journey towards homeownership. 

“Homeowners remortgaging from a current high fixed rate deal entered into during the past two years will no doubt benefit from a reduction of monthly payments whether the base rate changes or not. However, those who entered into a fixed rate deal at 2-3% during the pandemic will be facing significantly higher repayments taking into account the current rates being offered by lenders. 

“For landlords, and investors of buy-to-let properties, a drop in the base rate could mean mortgage payments are reduced for those with variable-rate BTL products, improving profit margins. However, a rise may mean landlords are further pressured into increasing rents to tenants in order to cover their increased repayments, or even feel they have no alternative but to sell properties, reducing the supply of rental homes. 

“Finally, a drop in the base rate may lead HMO (House in Multiple Occupation) landlords to refinance their existing properties, freeing up capital for renovations, upgrades or expansions. An increase in the rate could lead to interest-only HMO mortgage products – common among HMO landlords – to become more expensive, leading to the risk of rent increases, and difficulty in securing the finance to refinance or expand property portfolios.”