As has long been anticipated, the Bank of England announced that it will cutting the base rate to 5%, finally taking it down from a 16-year high of 5.25%.
The announcement will come as welcome relief for mortgage brokers, lenders and other property market professionals, who hope the move will boost consumer confidence and stimulate market activity.
It demonstrates the Bank’s belief that its inflation control plan is working, with the change hoping to avoid any potential knock-on effect that could have otherwise hit households and businesses in the near future.
The average 5-year fixed rate is down from 6.08% in July 2023, to 4.87% this week, and the average 2-year fixed rate is down from 6.61% in July, to 5.25%. You can check the current average mortgage rates for different terms and deposit sizes here, which we update weekly.
The Monetary Policy Committee said "it is now appropriate to reduce slightly the degree of policy restrictiveness".
It added: "The impact from past external shocks has abated and there has been some progress in moderating risks of persistence in inflation. Although GDP has been stronger than expected, the restrictive stance of monetary policy continues to weigh on activity in the real economy, leading to a looser labour market and bearing down on inflationary pressures."
Matt Smith, mortgage expert at Rightmove, said: “The highly anticipated Base 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 Base Rate may eventually fall to about 3.25%.”
