There’s speculation that there could be two more base rate cuts announced before the end of the year, following last week’s decision to drop from 5.25% to 5.0% – the first cut in four years.

Nicholas Mendes of independent mortgage broker John Charcol says: “This rate reduction is a promising sign for the future, bringing much-needed relief and confidence back to the property and mortgage market. Let’s also take a moment to recall Governor Andrew Bailey’s previous comments suggested that the Bank could cut rates faster than markets expect, making a total of three rate cuts this year a possibility.”

Bailey was one of three members of the Bank’s monetary policy committee who switched sides in last week’s vote, which was 5-4 in favour of the cut.

The cut has triggered widespread optimism about the economic revival over the weekend.

Jonathan Moyes, head of investment research at Wealth Club, comments: “Whisper it quietly, but an economic revival appears to be gathering pace. Recent survey data suggests the UK’s services and manufacturing sectors are performing strongly, unemployment remains low, house prices have resumed their upward trend, and the country is in a rare state of political stability. 

“With the UK on such a positive path, the interest rate cut will add further fuel to the UK’s recovery, but this does pose questions over whether the Bank risks unnecessarily stoking inflation. By the Bank’s own forecast, inflation is set to rise to 2.75% in the second half of 2024.”

Emily Williams, director of research at Savills, says: “We expect this to feed through into more market activity in the autumn, particularly if there are further cuts to the base rates in the coming months. Capacity for house price growth will remain limited until there is a more significant reduction in the cost of debt.

“However, this is a clear signal to the market that the Bank feels it has turned a corner in the battle against inflation, and it should give most buyers and sellers confidence that the market will improve as we head into 2025.”
 
Savills has forecast house price growth to total +2.5% this year, due to slightly improved economic conditions. However, steady cuts to the base rate will open up greater capacity for growth from 2025 onwards. Savills has forecast house price growth to total +21.6% over the five years to 2028.
 
Mark Harris, chief executive of mortgage broker SPF Private Clients, adds: “This will give borrowers an affordability boost, ease pressure on household finances and in doing so, assist the wider economy. Even if the new Labour Government manages to magic up an additional 300,000 homes this year, there is still a serious affordability issue for first-time buyers. 

“Any base rate reductions will be passed on via lower standard variable rates and to some extent headline rates, which will have a positive impact on borrowing boundaries. 
 
“Fixed rates are influenced by future base-rate movements and therefore not directly linked to what happens this week. Indeed, this rate cut has already been factored into mortgage rates with numerous lenders reducing their fixed rates in recent days on the back of declining Swap rates, with a sub-4 per cent five-year fix now available for new purchases.”

Matt Smith, Rightmove’s mortgage expert: “The highly anticipated rate cut has finally arrived, and 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. This sets us up for hopefully further cuts to come, and when we have seen further reductions to the Base Rate, people should really start to see the impact. However, it’s important to keep in mind that mortgage rates are widely expected to eventually settle at higher levels than previously, with the market view that the base rate may eventually fall to about 3.25%.”