The Bank of England yesterday cut interest rates by 0.25 percentage points to 4% following a rare second-round vote by its monetary policy committee (MPC) – the first time in its 27-year history that a double ballot has been required.
The widely expected reduction, down from 4.25%, is the fifth such cut in the past 12 months and brings borrowing costs to their lowest level since February 2023.
The nine-member committee was initially deadlocked. Four members voted to hold rates, four backed a 0.25-point cut, and one member favoured a more aggressive 0.5-point reduction.
A second ballot was held, resulting in a 5–4 majority in favour of the quarter-point cut.
CAUTIOUS CONFIDENCE
While the move signals the Bank’s cautious confidence in the inflation outlook, policymakers warned that risks remain. Inflation, currently at 3.6%, is expected to rise to 4% in September, driven by volatile energy prices and renewed wage pressures.
The Bank said the risk of “persistent inflation” had increased, suggesting the path to further rate cuts could be slow and uneven.
The decision reflects the delicate balancing act facing the MPC as it seeks to support economic growth without reigniting inflation.
Markets had priced in a cut, but the narrow vote and upward inflation forecast may temper expectations of additional reductions this year.
INDUSTRY REACTION
Kevin Shaw, National Sales Managing Director at LRG, says: “The Bank of England’s decision to cut the base rate by 0.25% is a welcome and timely move for both the property sector and the economy more generally.
“With the rate now back to where it was in March 2023 and a further cut likely before the end of the year (probably in November), this provides renewed momentum for buyers, sellers and developers alike.
“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.”
PROPERTY LED APPROACH
And he adds: “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.”
HEADWINDS ON THE HORIZON
But he says: “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.
“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.”
POSITIVE NEWS
Nathan Emerson, Chief Esecutive of Propertymark, says: “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%.”
WELCOME DEVELOPMENT
Guy Gittins, Chief Executive of Foxtons, says: “Today’s decision to cut the base rate is a welcome development for the property market and one that should continue to support year on year growth, as we saw in the first half of 2025.
“This interest rate reduction, along with improving mortgage affordability and changing lending criteria from the new mortgage guarantee scheme, all provide further reassurance and stability for buyers and investors.
“As we move into the second half of the year, our outlook remains cautiously positive given the continued appetite for vendors to bring great property to the market, while taking into consideration wider macro-economic factors.”
SHOT IN THE ARM
Jonathan Handford, Managing Director of Fine & Country, says: “Today’s decision by the Monetary Policy Committee to cut the base rate to 4% is the further shot in the arm that the property market has been waiting for.
“It’s not just the rate cuts themselves that help stimulate the market, but the economic tone they set. When reductions are seen as part of a stable recovery rather than a crisis response, they tend to stimulate real demand and drive up transactions.
“A softly-softly approach from the Bank of England could create the ideal conditions which translate as lower rates without runaway inflation, supporting a more balanced housing recovery across the regions.
“One interest rate shift doesn’t mean one reaction nationwide. We expect price movements to remain highly regionalised, especially where affordability remains stretched.”
CONFIDENCE BOOST
Matt Thompson, Head of Sales at estate agency Chestertons, says: “As the economy has been showing signs of slowing and inflation remains elevated, it was widely expected for the Bank of England to cut interest rates today.
“Whilst the reduction might not meet expectations of house hunters who have been hoping to see sub-4% rates this year, it will encourage many to go ahead with their property purchase.
“We have already seen a return in buyer confidence last month as more properties were put up for sale which created a larger selection of homes to choose from.
“Lower interest rates, even if reduced by just 0.25 percentage points, will only boost buyer motivation over the coming months.”
CLEAR SIGNAL
Simon Gammon, Managing Partner, Knight Frank Finance, says: “[The] rate cut sends a clear signal that the Bank of England is now more focused on slowing growth and rising unemployment rather than the threat posed by inflation.
“The split vote – with members supporting everything from a hold to a 50 basis point cut – underlines how finely balanced the decision was. But the direction of travel is clear.
“Borrowers now believe mortgage rates are more likely to fall than rise, and that’s lifting sentiment across the market. If current trends persist, we could see sub-3.5% mortgage rates by Christmas.”
TIP THE BALANCE
Jeremy Leaf, north London estate agent and a former RICS Residential Chairman, says: “Anticipation of a cut in base rate has already applied downward pressure on mortgage payments and helped drive the increase in mortgage approvals announced at the end of last month.
“After weighing conerns about inflation with a need for growth, the Bank clearly decided it was safe to stimulate more activity.
“The housing market will play its part with a positive multiplier effect on other parts of the economy crucial to job and social mobility.
“The reduction will help to tip the buyer balance for some from ‘why?’ to ‘why not?’ and allow borrowers to plan ahead with more confidence to take on debt.”
MORE RATE CUTS NEEDED
Jason Tebb, President of OnTheMarket, says: “As expected, the Bank of England reduced interest rates to 4%. Even though inflation increased slightly to 3.6% in June, still some way above the 2% target, the rate setters took action this time around to boost growth and the wider economy.
“Rate reductions are hugely welcomed by buyers and sellers, boosting confidence, easing affordability and giving impetus to the housing market, resulting in improved activity and transaction levels.
“Now that the stamp duty concession has ended, further rate reductions are even more essential to give the market added momentum as the year progresses.”
SIGNAL OF INTENT
Iain McKenzie, Chief Executive of The Guild of Property Professionals, says: “The Bank of England’s decision to cut the base rate from 4.25% to 4% is a welcome step towards further stimulating the housing market and supporting wider economic resilience.
“Despite persistent inflationary pressures, this move sends a strong signal of intent to sustain recovery and bolster confidence across sectors.
“This cut will act as a catalyst for improving market sentiment and will further energise the growing pool of motivated buyers we’re seeing.
“Encouragingly, mortgage rates continue to trend downward supported by falling swap rates, which is helping to improve affordability and unlock demand, particularly among first-time buyers and those with larger deposits.
“While the overall economic outlook remains cautious, with GDP growth forecast at just 1.1% and inflation still above target, the fundamentals in the housing market are encouraging. Activity levels are healthy, affordability is improving, and house price growth is expected to remain moderate and sustainable.”
WAIT AND SEE
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “There’s a definite sense that everyone – buyers, sellers, and estate agents – has been waiting to see what happens with interest rates. The possibility of a reduction in mortgage costs is a frequent topic of conversation in our offices.
“This cut will give the market which experienced a brief lull in activity at the start of the school holidays but has since picked up significantly, a further boost. Serious buyers are committing and keen to move before the end of the year.”
RATES COULD GO EVEN LOWER
Adrian Hall, the director of surveying at HouzeCheck, a digital surveying platform, says “Despite persistent inflation, it was almost certain the interest rate would be cut – the only uncertainty was the magnitude of the reduction.
“Given the number of job vacancies continues to decrease and is now below pre-pandemic levels, and with unemployment rising to 4.7%, the highest level since June 2021, it was widely anticipated the bank rate would decrease to at least 4%. There is no longer concern regarding wage growth.
“This development is highly favourable. Falling mortgage rates benefit not only first-time buyers but also millions of households planning to remortgage in the coming years.
“The current question facing the Bank of England is the direction of future policy. Is this the final rate cut of 2025? Alternatively, could the Morgan Stanley team be correct in predicting that interest rates will decline to as low as 2.75% in the first half of the upcoming new year, ultimately reaching 2%?”
