The Bank of England has cut the interest rate to 4%, the lowest in over two years and the fifth cut since last August.
The decision passed on a knife-edge, with the committee forced to hold a second vote for the first time in its history as its members were split on whether to reduce the rate or not.
The decision comes despite inflation (CPI) sitting at 3.6% in June 2025, well above the Bank of England target rate of 2.0%.
The cut follows a number of signs that the economy is struggling, with construction output falling in July, unemployment rising in the last quarter and the UK’s GDP shrinking in April and May.
Here’s how the news has been received in the housebuilding industry:
Emily Williams, director of research at Savills, commented: “Today’s interest rate cut by the Bank of England offers a welcome boost for the UK housing market. Combined with the recent easing of mortgage regulations, lower rates have already begun to build momentum over the past couple of weeks – especially among first-time buyers who are taking advantage of improved affordability. We expect the latest cut to strengthen this activity further, although the close nature of the decision means it is unlikely that mortgage lenders will be strongly pricing in expectations of further cuts this year.”
“Zoopla has recorded an 8% rise in agreed sales on the year, despite the traditional summer slowdown. This has in part been driven by better alignment on price between buyers and sellers with price adjustments increasing by 21% in the three months to July 2025 compared with the same period last year (according to TwentyCI).”
“Total transactions are expected to reach 1.04 million by year-end, according to Savills’ latest forecast. While elevated supply levels may temper price growth, Savills maintains a positive outlook for 2025 overall despite the slow start.”
Stephanie Daley, director of partnerships at mortgage advisor Alexander Hall, commented: “We’ve already seen significant strength return to the mortgage sector since interest rates began to stabilise and trend downwards. Today’s decision to further reduce the base rate will only serve to fuel this momentum, easing the cost of borrowing for the nation’s homebuyers even further.”
“This welcome boost comes in addition to the recent decision to make the Mortgage Guarantee Scheme permanent, alongside the loosening of income lending restrictions, both of which have already had a positive impact on mortgage affordability.”
“As we move into the second half of the year, this positive shift in the mortgage landscape is expected to support sustained demand and contribute to the long-term resilience of the market.”
Simon Dawson, chief revenue officer at Outra, said: “The Bank of England’s base rate remains a central force shaping the UK housing market. Historically, lower interest rates have reduced borrowing costs, encouraged home buying, and supported house price growth. However, this relationship is never purely mechanical; it is influenced by a broader mix of factors, including employment trends, consumer confidence, and developments in the global financial landscape.”
“With the Bank of England today deciding on a 25-basis point cut, market conditions appear set to support the current mild house price growth observed across several leading indices. Yet even with this reduction, it’s unlikely to trigger a significant upswing in housing market activity. Instead, a more stable and measured trajectory is expected to continue, barring any major economic shocks.”
“While national trends offer valuable insight, real estate professionals and investors alike should be cautious not to overlook regional nuances. Localised supply-demand dynamics, economic resilience, and demographic shifts mean that markets can behave very differently across the country. At Outra, our data has identified several interesting movements in local housing markets over recent quarters, trends that may point to emerging opportunities or early signals of change”.
Nick Leeming, chairman of Jackson-Stops, commented: “The Bank of England’s ‘gradual and careful’ approach remains firmly in place, even against a shifting economic backdrop. While widely expected, today’s cut underscores the need to strengthen confidence amid signs of a softening labour market.”
“For mortgaged homeowners wanting to make their next move this decision offers timely relief, and lower borrowing costs should help to unlock activity across the market.”
“Regional disparities continue to shape market performance. Across the Jackson-Stops network in the mid-high end of the market, towns like Bury St Edmunds, Chichester and Colchester are seeing renewed buyer interest and modest price growth. Meanwhile, high completion levels in Colchester, Hale, Northampton, and Sevenoaks reflect sustained demand in lifestyle-led, commuter-friendly locations.”
“These pockets of resilience highlight the realities of a market, driven by needs rather than nice-to-haves. As affordability improves and sentiment stabilises, we expect these regional strengths to continue driving market performance through the second half of the year.”
