The Bank of England has announced a further cut in interest rates yesterday to 4%.
The Monetary Policy Committee voted to slice another 0.25 percentage point from the Base Rate, despite the fact that inflation is still stubbornly sitting above the 2% target.
This is the fifth reduction since August last year, when rates started steadily coming down from a peak of 5.25%.
There was a strong expectation of the cut following the release of Office for National Statistics (ONS) showing the rate of UK unemployment rising to 4.7% in the three months to May – the highest level for four years.
And average earnings growth, excluding bonuses, slowed to 5% in the same period – its lowest level for almost three years.
Bank of England Governor Andrew Bailey recently signposted that the Bank would be prepared to cut rates if the jobs market showed signs of weakening.
Why has the rate been cut?
The Bank has been using the base rate as a way of taming inflation. The Office for National Statistics (ONS) reports that UK year‑on‑year CPI inflation stood at 3.6 % in June 2025, up from 3.4% in May. This remains well above the Bank of England’s 2% target.
The Bank's Monetary Policy Committee (MPC) had a dramatic 5-4 vote, with 4 voting against the cut.
This is the lowest cut from the Bank of England since March 2023.
Breakdown by month:
- March 2025: 2.6 %
- April 2025: 3.5 %
- May 2025: 3.4 %
- June 2025: 3.6 %
That April “spike” was pinpointed to sharply rising water, energy, and transport costs – contributing to that 3.5%.
How does this impact interest rate predictions for 2025?
With yesterday’s cut bringing the base rate down to 4%, many analysts expect we’ll see at least one more cut before the end of the year, possibly in November, which could take the rate to 3.75%.
With inflation ticking up slightly, the Bank of England is still signalling a cautious approach, aiming to support the economy without letting inflation take off again.
Growth supported by sensible policy
After a sluggish spring for GDP, with declines in both April and May – not helped by the Trump lumps and bumps – the Bank has rightly judged that now is the moment to ease the brakes.
A property-led approach to growth has been a priority of this government for the last year, and we are now seeing that strategy bear fruit. With careful monetary easing, the sector now growing in a measured, and therefore, a sustainable way.
Our own figures reflect this steady growth. Sales in July were the strongest for over a year – which is especially encouraging given that the summer is typically a quieter period for property transactions.
Risks ahead at the Budget
There are, however, headwinds on the horizon. October’s Budget is likely to bring tax changes, and there has been little, so far, to suggest that the government will respond to the sector’s repeated pleas for fiscal measures to support the property industry, such as a reduction in Stamp Duty. The Chancellor will need to be very careful not to implement tax changes which offset the benefits of falling interest rates and risk stalling recovery.
The property market remains very price-sensitive. While for many, this interest rate cut will help mitigate the rising cost of living alongside any future tax increases, those gains must not be undone.
Resilience, not overheating
The market does not appear to be in any danger of overheating; it is responding to improving conditions in a cool and measured manner. We expect that to continue, and early signs from our sales figures suggest that property will remain a vital driver of growth for the economy.