The rate reduction marks the third fall after being brought down to 5% and 4.75% in August and November last year respectively.

This latest decision from the BoE brings interest rates to their lowest since May 2023.

Industry professionals have reacted to the latest BoE cut

Marylen Edwards, director of mortgages at specialist lender MT Finance:

 “The MPC's decision to cut the base rate signals the continuation of an easing cycle, reflecting growing confidence in the Bank of England's progress on controlling inflation while acknowledging the need to support economic growth.

“The timing of this cut could be particularly significant for the property market, with spring approaching – traditionally a busier period for property transactions.

"The rate reduction is likely to catalyse increased market activity, potentially offering first-time buyers a more favourable entry point.

“However, the market response is expected to be measured and nuanced. While the cut represents a positive shift, borrowers should temper expectations, as mortgage rates may not immediately reflect the full extent of the base rate reduction.”

Ryan Etchells, CCO at Together:

“Today’s decision to cut rates by 0.25% will act as a welcome shot in the arm for the UK housing market and the country’s stagnating economy.

“It will mean the costs of borrowing for first time buyers and those who need to remortgage their homes should begin to fall, improving housing affordability for millions of people.

“It will also be a relief for many beleaguered SME businesses, who have had to put on hold plans for investment while they navigate the continued high-rate environment.

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“However, despite lower borrowing costs, some employers may still be holding on to assess the impacts of announcements in Rachel Reeves’s budget, particularly the effect of increased labour costs through higher employer National Insurance contributions and a steep rise in the minimum wage.

“These, coupled with expected rise in energy costs, will either have to be absorbed by employers or passed on to consumers.

“Looking ahead, we do expect to see further base rate reductions in 2025, although maybe at a slower pace than most economists predicted towards the end of last year.

“There has been some calming in the volatility of swap rates, and the latest UK inflation figures of 2.5% in December are nearer to the Bank’s 2% target.

“However, inflation will probably increase in the short-term, with higher energy costs and the prospect of a global trade war after US president Donald Trump imposed tariffs. We will be watching to see how the Bank responds in the next 12 to 18 months.”

Martyn Smith, managing director at Black & White Bridging:

"The Bank of England’s decision to lower the base rate is a welcome step towards improving borrowing conditions across the market.

“While lenders and borrowers alike will benefit from reduced financing costs, the impact on the specialist lending sector will depend on how quickly this translates into greater liquidity and confidence.

“For bridging finance, the rate cut could encourage more developers and investors to proceed with projects, particularly as affordability pressures ease slightly. However, the challenges facing small landlords in the BTL sector remain significant, with regulatory changes and tax burdens continuing to shape the market.

“It will also be crucial to watch the upcoming ONS inflation data later this month. If inflation continues its downward trajectory, this could reinforce expectations of further rate cuts later in the year.

“However, if inflation remains stubbornly above the Bank’s 2% target, we may see a more cautious approach from policymakers.”