The Bank of England Monetary Policy Committee voted 5 to 4 to lower the base rate by 0.25%, from 4% down to 3.75% its lowest level in nearly three years.
This is the 6th base rate cut since August 2024, and it’s great news for homeowners and property investors who have variable rate mortgages.
News that the inflation rate fell further than expected earlier in the week to 3.2% probably influenced decision makers, including Governor Andrew Bailey (main picture), on the Bank’s Monetary Policy Committee (MPC).
A sluggish economy will also have been a factor considered by the MPC as it looked at whether to freeze the rate as it did last month.
It was a surprisingly close vote, with five members opting for a cut of 0.25% and four choosing to keep the rate static at 4%.
Further cuts at the next two MPC meetings in February and March are also being predicted by some analysts.
The move may raise hopes for first-time buyers and those looking to move up the property ladder as it could lower the cost of borrowing.
However, many mortgage lenders may have already priced in these cuts as rates have been coming down in recent weeks.
Estate agents have still seen it as a confidence boost for the market though.
Kevin Shaw, national sales managing director at LRG, said “today’s reduction in interest rates is very welcome news – for homeowners, buyers, property professionals, and no doubt Government ministers.
This warming news is set against a chilly backdrop: unemployment has increased to 5.1%, while the November Budget tightened the fiscal screws. Inflation, however, has eased to 3.2% and, thanks to today’s cut, looks likely to continue on that trajectory. With a reduction in interest rates we expect an increase in activity and therefore transactions.”
Fixed rate mortgage
The base rate change won’t affect your mortgage repayments. We’ll be in touch when you're nearing the end of your fixed rate period to let you know what happens next.
Variable rate mortgage
We're reviewing our variable rate mortgages. We’ll send you details of any change to your interest rate and mortgage payments by post. The change won't happen right away so you don't need to do anything until you receive our letter.