The base interest rate used to calculate mortgage premiums has been cut by 0.25% following a meeting of the Bank of England’s Monetary Policy Committee (pictured, below).
It has decided to take the ‘breaks off the economy’ following a month that has seen the UK battered by internal and external financial and economic events.
Members of the committee voted five against four in favour of the cut, saying that reducing its Bank Rate to 4% would help an economy that has seen growth “subdued, consistent with a continued, gradual loosening of the labour market”.
“A margin of slack is judged to have emerged in the economy. Downside domestic and geopolitical risks around economic activity remain, although trade policy uncertainty has diminished somewhat.
“A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate.
“The restrictiveness of monetary policy has fallen as Bank Rate has been reduced.
“The timing and pace of future reductions in the restrictiveness of policy will depend on the extent to which underlying disinflationary pressures continue to ease. Monetary policy is not on a pre-set path, and the Committee will remain responsive to the accumulation of evidence.”
Its next decision will be on the 18th of September.
Industry reaction
The industry leader
Nathan Emerson, CEO of Propertymark
Nathan Emerson
“Throughout the world, many central banks have faced considerable pressure to reduce interest rates, and the UK has been no exception.
“So, this news is extremely positive and remains consistent with what has been widely hoped for.
“While this news will be very welcome for many buyers and sellers who may be empowered to potentially borrow more to finance their next house move, inflation is still above the Bank of England’s target rate of 2%.”
The portal
Matt Smith, Rightmove’s mortgage expert
Matt Smith
“As expected we now have the third Bank Rate cut of the year, with the Bank continuing along its forecast trajectory.
“Mortgage lenders have had a bit of room to reduce rates over the last week, owing to the ongoing developments around global tariffs. However, we expect that lenders will use the headline of today’s cut as the catalyst to reduce their rates a little further, though lender competition remains fierce and we don’t expect major rate drops.
“Lenders have been competing for business in a market which has the largest supply of homes for sale in a decade. A combination of rate cuts and changes to buyer affordability criteria are helping many home-movers to responsibly borrow more towards the home that they want.
“The market expects there will be one more Bank Rate cut before the end of the year, with an outside chance of two. Any further cuts would likely see this cycle repeat again – with lenders using it as an opportunity to reduce rates a little more. It bodes well for the second half of this year, with further mortgage rate reductions and stable prices likely to encourage more activity.”
The estate agent
Nick Leeming, Chairman of Jackson-Stops
Nick Leeming, Jackson-Stops
“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.”
The lender
Paul Noble, CEO of Chetwood Bank
Paul Noble
“Today’s rate cut will be welcomed, but it’s slow progress for an economy that’s in desperate need of a kickstart, Domestically and globally, the economy has taken a beating over the last year, but a trade deal secured with the US is one factor that has started to ignite some flickers of hope and likely prompted the MPC to continue to ease off on the brakes.
“However, inflation remains above target, and many will argue that the MPC should have not only acted sooner but acted more decisively too. After all, leadership isn’t just about reacting when conditions are safe – it’s about shaping the path forward.
The broker
Paresh Raja
Paresh Raja, CEO of Market Financial Solutions
“Inflation might remain above the 2% target, but a softening labour market and sluggish economic growth mean the Bank of England is justified in taking this action. More of the ‘wait-and-see’ approach looked like doing more harm than good, and this is likely to provide the UK property market with a real boost.