Bank of England Reductions
The Bank of England (BOE) has reduced rates by 0.25% for the sixth time since the all time low of 0.1% in January 2022 to 3.75%. Now inflation has settled around the target of 2.00%.
With inflation down from 3.60% to 3.20% it spurred the Bank of England to reduce rates for the sixth time after 15 previous consecutive rate rises (5-4). Four members preferred to maintain Bank Rate at 4.00%.
The Bank of England says it expects the UK economy to grow by 0.75% in 2025, down from a previous forecast of 1.5%.
Today’s base rate cut is welcome news for people looking to sell and buy homes in the remainder of 2025. It will provide a boost to market sentiment and filter slowly into lower mortgage rates as the cost of fixed-rate mortgages already reflects future cuts in the base rate. This, alongside reforms to mortgage regulations announced recently, will help boost buying power. This is important at a time when there is a large number of homes for sale across the UK – the average agent has 34 homes for sale. Improved buyer confidence will support sales and help more people realise their moving ambitions in the year ahead.
Inflation fell sharply to 3.20% and is still expected to settle back around 2% shortly after.
Future uncertainty with Trump’s tariffs has contributed to the bank of england reducing interest rates. this is just ahead of the UK-US trade deal announcement, citing weaker growth and easing inflation due to higher tariffs….
Mortgages
Today’s reduction could see the return of sub – 4% mortgages being offered by lenders.
Central banks around the world have put up borrowing costs to bring down inflation. The European Central Bank recently reduced interest the rate by 0.25 percentage points to 2.40 per cent and US Federal Reserve held rates at 4.5% with recently elected president Donald Trump.
For the 629,000 homeowners on tracker deals that move in line with the base rate, there will typically be a further £29 fall in monthly repayments, according to figures from banking trade body UK Finance.
The 693,000 people on the standard variable rate will need to wait for the response of their lender.
However, if their provider matches the base rate fall, typically they will pay £17 less a month.
If you have a fixed mortgage deal, the rate you pay monthly in interest is fixed until the deal expires, so there’ll be no immediate change.
Some lenders have already factored to futher bank of england rate reductions by June 2026.
Further rate reduction in February?
Financial markets have pencilled in another reduction in February, provided inflation continues to settle around 2.00%.
What are your thoughts on the Bank of England rate reductions?
