Another cut in mortgage rates: how UK buyers and landlords will benefit

The Bank of England (BOH) has just delivered a welcome boost for home movers, buy-to-let landlords, mortgaged homeowners and first-time property buyers. Last month the base rate – which affects the cost of mortgages – went down from 4.50 to 4.25 per cent. This is the latest in a series of cuts made by BOH as it reacts to falling inflation levels. In response, several leading UK lenders have already revised their mortgage rates downwards.

This welcome quarter per cent reduction should make a significant difference if you are planning to buy a property. It will also benefit a huge number of homeowners who are currently paying into a mortgage or preparing to remortgage.

How have these interest rate cuts impacted the mortgage market?

The Bank of England’s recent decision adds more good news to an array of positive indicators for borrowers buying property in the UK.

• Over the past few weeks fixed rates for residential and buy-to-let properties have fallen across all loan-to-value (LTV) options.
• For the first time since September 2022, the two-year 75% LTV rate fell below four per cent. 
• The availability of low-deposit mortgage options is higher now than in the last 17 years, specifically with respect to 90% and 95% LTV deals. 
• Since February this year, the cost of an average buy-to-let mortgage rate has fallen every month.

The latest rate cut will provide a further incentive to buyers who have been waiting for the right time to purchase.

Fortunately, it’s not just individuals with large deposits or homeowners with equity in their properties who stand to benefit. A broader range of borrowers will be able to take advantage of these favourable rates.

Buyers with lower deposits are now seeing more 5% and 10% deposit mortgage products enter the market. This gives cash-poor buyers much more flexibility when buying a home.

How will the rate cut affect my mortgage payments?

If you are a homeowner or buy-to-let landlord with a tracker mortgage linked to the BOH's base rate, you should already be enjoying a cost reduction. Borrowers with Standard Variable Rate mortgages should also see their monthly payments reduced.

Those on fixed mortgages will pay the same monthly rate until their fixed deal ends, after which they will be able to take advantage of the new, lower rates. It's worth noting that most borrowers will be able to lock in a lower rate up to six months before their deal’s end date.

Should I hold on for a further rate drop?

The Bank of England’s Monetary Policy Committee meets every six weeks to decide whether to make cuts to the base rate. At that time they consider factors such as the amount of growth in the UK economy, employment figures, inflation levels and the geopolitical situation.

Experts had been predicting that the BOH would introduce further cuts this year, but the Bank’s governor Andrew Bailey has struck a note of caution. Due to the pace and intensity of world events, he has warned that the future of further cuts is “shrouded in uncertainty”.

Global turbulence can affect the UK market, making it almost impossible to second guess how the BOH might respond. The best advice we can offer buyers at this time is to explore your options, lock in a deal then keep it under review. If rates fall again, it should be possible to swap to the better deal before the transaction completes (be aware, however, that in some cases your lender may require you to make a new mortgage application).

What’s happening to the London property market?

If you are buying a property in London there are indications that sellers may be open to negotiation. Rightmove recently reported that average asking prices in the capital have dropped by 0.09 per cent, to £695,414. This is because competition has ramped up after more properties entered the market. Buyers are also more price-conscious since Stamp Duty costs rose in April.

However, there are signs that this drop could be temporary. Rightmove has identified an increase in London property searches as businesses cut back on hybrid working. The capital has once again become the most searched-for area in the UK and 58% of Londoners are opting to stay in the city rather than escape to the country.

Where can I get honest advice?

In London, property prices can vary significantly within a relatively small area. Our clients depend on our nuanced, expert knowledge to get the best value from their property purchases. If you need help to navigate this complex and dynamic marketplace, simply get in touch. The agents at our offices in Kennington, London Bridge and Westminster are always ready to offer sound, honest and accurate advice.