The Bank of England has reduced Bank Rate for the first time in more than four years.

The rate is now 5%, having been held at 5.25% since August 2023, after 14 consecutive increases. The Monetary Policy Committee (MPC) marginally voted in favour of reducing Bank Rate, by 5 votes to 4. Many major mortgage lenders had already reduced their rates in anticipation of the cut and more are expected to follow suit. Despite this, the reduction is not expected to make a significant difference to mortgage affordability overall, however it is hoped to be the first of more cuts which should alleviate some of the financial pressures on homebuyers.

Matt Smith, Rightmove’s mortgage expert, commented, “While those looking to take out a mortgage soon shouldn’t expect to see drastically lower mortgage rates, we would expect the downward trend we’ve started to see continue.”

What does it mean for the housing market?

“The Bank of England’s Base Rate cut, which follows recent reductions in mortgage rates, is encouraging for those looking to remortgage, purchase a first home or move along the housing ladder. However, affordability constraints and the lack of available properties continue to pose challenges for prospective homeowners. Against the backdrop of lower mortgage rates and potential further Base Rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year.” Amanda Bryden, Head of Mortgages, Halifax

Source: Halifax, August 2024