The Bank of England has cut UK interest rates from 5.25% to 5%, the first time that borrowing costs have been reduced in over four years.
Interest rates had spiralled from 0.1% in December 2021 to 5.25% in August 2023, where it remained until today’s announcement.
Chancellor Rachel Reeves has welcomed the news while pointing out that homeowners and potential buyers are still facing significantly higher mortgage rates.
Reeves said: “While today’s cut in interest rates will be welcome news, millions of families are still facing higher mortgage rates after the mini-budget.”
“That is why this Government is taking the difficult decisions now to fix the foundations of our economy after years of low growth, so we can rebuild Britain and make every part of our country better off.”
The BoE’s Monetary Policy Committee approved the cut by a vote of five to four, saying that the decision was made possible by the progress that has been made on inflation, although it did warn that this may rise temporarily.
Ben Thompson, deputy CEO of the Mortgage Advice Bureau, said: “This decision could’ve gone either way, but the Bank of England has rolled the dice and now finally has sufficient confidence to cut rates for the first time since 2020.”
“For homeowners and those who’ve been looking to get on the property ladder, the past few years have been tough, but there are signs of it already changing. Rates on mortgage deals have been falling, and it’d be feasible that more cuts will follow. For those looking to buy, now is the time to seek advice and get mortgage ready.”
Chris Baguley, a director at property finance specialist Together, said: “Today’s decision to cut the Bank of England base rate will be of huge importance, not only to the home-buyers and movers we support, but to SME property investors and developers who are key to providing future growth in the UK economy.”
“The base rate has been increasing from record-low levels since December 2021 and, while we wouldn’t expect a return to an era of the cheap credit we’ve previously seen, today’s decision gives a clear signal that inflation has been slowly brought under control and the economy is beginning to head in the right direction.”
“Earlier this week, we saw the deputy prime minister set ambitious housebuilding targets – signalling that the government is keen to get spades in the ground as quickly as possible. A rate reduction today will be a significant shot in the arm for many of our SME developer and investor clients, allowing them to press ahead with building the homes to meet the government’s ambitions.”
Guy Gittins, chief executive officer of Foxtons, 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 4%.”
“With interest rates now starting to fall, we only expect that these positive property market trends will intensify.”
James Dickens, managing director of Wavensmere Homes, commented: “We are very pleased the Bank of England has finally cut the Base Rate to 5%. It’s staggering to think this is the first reduction since March 2020.”
“With over 300 of the 560 Wavensmere Home completions for 2024 falling over the remaining five months of this year, we hope this cut begins to ease the cost of lending for our customers and enables more people to access the housing ladder.
“For Labour to deliver a housing revolution, stimulating demand for new homes is a crucial part of the mix.”
