The Bank of England’s Monetary Policy Committee (MPC) has announced a cut of 25 basis points in the base rate of inflation today. That puts the rate at 4.5%, reduced from the previous level of 4.75%.
That is also 0.75% lower than the high of 5.25% seen in 2024 before the recent round of cuts began. These reductions are all a result of the overall rate of inflation falling from the historic highs of more than 10% seen during and after the COVID-19 pandemic.
More broadly, it shows that the fundamentals of the national economy are improving. That’s good news for everyone, but especially for anyone invested in the property market.
Firstly, if the overall economy is more stable it means that the property market is too. Secondly, more stability and a slowing rate of inflation means that people will have more money in their pocket and more capacity to borrow.
In fact, today’s cut and at least a further two cuts are already priced in to the lower mortgage rates we are seeing. Lower borrowing costs means more people will be able to borrow, so we are likely to see a busier housing market over the rest of the year and in the years to come.
Money markets are predicting a further fall in the overall rate of 67 basis points over the rest of 2025. That means the markets are certain of another two cuts – likely taking the overall base rate to 4% - and consider it possible that there may even be an additional cut after that.
Andrew Bailey, Governor of the Bank of England, is positive about the potential for future cuts. He said the MPC expects to be able to cut rates further as, “the disinflation process continues”.
Suren Thiru, ICAEW Economics Director, said: “This decision confirms that UK interest rates are firmly locked onto a downward trajectory, providing a much-needed fillip to consumers battling with high mortgage costs.
“The unanimous decision to loosen policy suggests that concerns among rate setters over the UK’s struggling economy are currently outweighing worries over rising inflation, opening the door for another rate cut sooner rather than later.”
Overall, for those looking to buy UK property in 2025, this is very good news. The exact effects will continue to be felt over the year, but in general it should bolster the market and continue the extremely positive start to 2025.
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