BANK OF ENGLAND BASE RATE CUT

The recent Bank of England (BoE) base rate cut to 4.75% has sparked a mix of reactions, particularly in relation to the housing market and broader economic conditions. Here are some key takeaways from the decision

1. Moderate Impact on Mortgage Rates:

The base rate cut is expected to provide some relief to borrowers, especially those with variable-rate mortgages or unsecured debts. However, while the rate cut might ease immediate pressure, mortgage rates may not decrease significantly in the short term due to other influencing factors, such as lenders' cost of funding and market conditions​

2. Cautious Outlook for Further Cuts:

Although the cut marks a shift towards easing, experts believe that future cuts will be more gradual. The UK’s fiscal policies and the potential impact of the government’s increased spending, along with concerns over inflation, particularly in services and wages, are expected to moderate the pace of further reductions​. There’s a growing expectation that any future cuts will be more incremental, with only a few anticipated by mid-2025.

3. Potential Benefits for Homeowners: The rate cut could encourage some homeowners to move ahead with house purchases or home improvement projects, as financing through second-charge mortgages becomes more attractive. It may also ease affordability for some buyers, particularly older borrowers who face unique financial challenges​

4. Concerns Over Inflation:

Despite the rate cut, inflation remains a concern, particularly in sectors like energy and services. Experts caution that while inflation has slowed in some areas, rising wages and the impact of government fiscal measures could lead to sustained inflationary pressures. This means that the BoE may proceed with rate cuts cautiously and adapt its policy depending on future inflation trends

​​In summary, the base rate cut offers some immediate benefits, but its longer-term impact on the property market and borrowers will be shaped by broader economic factors, including inflation and government fiscal policies.