Industry professionals react to ‘hugely positive’ and ‘much needed’ base rate cut

The decrease marks the seconf time since August that rates have been dropped, with the first being the decrease from 5.25% to 5% in August.

After being held through September and October the MPC has now lowered the rate by a further 25 percentage points.

Members of the specialist finance industry have reacted to the latest cut from the BoE:

Paresh Raja, CEO at Market Financial Solutions:

“The market will breathe a sigh of relief. A cut always looked likely, but the turbulence of the past week – the budget and US election – could have encouraged the BoE to hold.

“Lenders are able to pass lower rates on to borrowers, providing a much-needed boost to homebuyers and property investors alike.

“We anticipate that the market will gain momentum in the coming weeks as it adjusts to a more accommodating – though still challenging – monetary environment.

“The past few months have provided a timely reminder that the actions of Threadneedle Street typically exert a greater influence on market activity than decisions made in Westminster. The house price growth following the BoE’s last rate cut in August reflects this impact, and today’s cut should inspire further confidence.

“It’s therefore crucial that investors prepare for a likely surge in market activity and position themselves to seize any opportunities that could soon emerge.

“However, it’s important to recognise that interest and mortgage rates remain significantly higher than pre-December 2021 levels.

“As a result, securing suitable financing options will still be a significant challenge for some borrowers – this is where the specialist lending sector will continue to play a vital role.

“To help build momentum in the property market, lenders must now step up and focus on providing a diverse range of bespoke and flexible financial products that can meet the specific needs of brokers and their clients."

Mark Harris, CEO at SPF Private Clients:

“As widely expected, the MPC voted to reduce interest rates by a quarter-point to 4.75 per cent at today’s meeting.

 “This is hugely positive for borrowers, with the BoE doing the right thing given inflation is below the 2% target.

“Those on base-rate trackers and variable-rate mortgages should see their monthly payments fall, and those savings will be gratefully welcomed by hard-pressed borrowers.”

“We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months, bringing further relief for homeowners and home ownership within the grasp of first-time buyers.

“However, what cannot be guaranteed is where rates end up, nor the pace it takes to get there. If you cannot afford to be wrong — that is, if rates were to rise you would struggle to pay the mortgage — then a fixed-rate mortgage usually makes sense.”

Robert Pritchard, head of capital markets at Cohort Capital:

“Today’s rate cut brings some much-needed – albeit marginal – relief for both personal and commercial property owners.

“While the market continues to offer significant opportunities, the landscape has been slightly more challenging over the past few years and this reduction will offer immediate support to those on floating rate loans. It will also provide a shot in the arm for those looking to acquire or refinance assets.

“However, for this cut to truly impact the property market, it needs to signal a sustained downward trend, as personal and commercial property lending is heavily dependent on the market’s view of rates over a three-to-five year period.

“The fiscal loosening outlined in the government’s budget last week, along with a second presidency for Donald Trump, would suggest a sharp drop in rates is unlikely, but many hope that the drop in inflation could provide the central bank with more room for further reductions.

“While not affected as much as the main residential market, the prime property sector has been impacted by the rise in interest rates, so the reduction by the BOE will be welcome.

“However stable government policy and economic growth are the main drivers in this market. If the country cannot offer this, it will not capture the benefits that a thriving prime property market can bring to the economy and public purse of the UK.”

Ben Allkins, head of mortgages and protection at Just Mortgages:

“Even in the wake of the recent Budget, market forecasts have remained really optimistic about the prospects of a subsequent cut to the base rate — especially as inflation has continued to improve.

“It has long been on the cards and is hugely welcome as potential buyers snap out of their pre-Budget holding patterns and get their moving plans back on track.

“The hope is that positive movement on the base rate will rub off on swap rates and will give lenders the platform to review their pricing.

“Ultimately though, lenders do need to lend and today’s decision will certainly influence their decision making as they look ahead to their end-of-year lending targets.

“While it is easy for borrowers and brokers to get bogged down in elements of the Budget, this is a really positive headline that we need to be sharing with our customers.

“Brokers play such a critical role in educating clients about changes in the market and the many opportunities still available. If we are proactive, we can be that driving force in reigniting consumer confidence and ensuring a positive end to the year.”