Quick summary
- The Bank of England has changed the Base Rate, what does this mean for property value and mortgages?
- Tracker mortgages pass changes through more directly, so variable-rate borrowers may see quicker effects on monthly payments.
- Asking prices could see an increase in a more stimulated market, but realistic pricing still matters to get sales over the line.
- First-time buyers could benefit from slightly better affordability and a wider choice of products.
The UK’s battle with inflation over the last few years appears to be making progress. On 7 August the Bank of England cut the Base Rate by 0.25 percentage points to 4.00%. This is the lowest level in over two years and the fifth cut since last summer.
Will This Move The Dial on Mortgage Rates?
Short answer: Not by much, at least not overnight.
Fixed-rate mortgages are priced off financial markets, which reflect where traders think rates will be in mid to long-term future. Because the cut was widely expected, rates have barely budged, but some lenders’ longer fixed rates have nudged down a little, however don’t expect them to plunged.
There’s good news for some, is those on a tracker mortgage will have seen pretty much immediate changes in their rates. Even though the change will have been small.
What about Asking Prices for Homes?
What we have been seeing recently is that asking prices have been a little stagnant, they go up and down in the short term, and continue to increase overall in the longer term. But that’s not the entire picture: As the UK summer months usually see a trend of lower activity in the market, this tends to push prices down a little – in a supply and demand situation.
However, in the longer term, the lowering of the interest rate is likely to stimulate the market and provide more capital for the housing sector. This could have a two-fold effect: One is that it encourages those who have been putting off a move, to finally take the jump. It could also allow more first time buyers to enter the market – with more buyers and average amount of sellers – this could allow people to slightly increase their asking prices.
That poses the question…
What About First Time Buyers?
We empathise with first time buyers, unless you have parents who are able and willing to gift you money, it’s very hard to get on the ladder. But here is some good news, there are some tailwinds at your back this time round:
A reduction in the base rate improves your chances of getting a mortgage, and being able to borrow more. Put simply, even a very small reduction in interest rates, multiplied over the lifetime of a mortgage, improves the affordability and reduces the amount of interest you will pay.
Approvals are increasing. Mortgage approvals for house purchase were about 64,000 in June, up on a year earlier, pointing to a gradually healing pipeline. BoE lending data also shows a rising share of loans going to first-time buyers.
Rules and products are shifting. Regulators have lifted the threshold at which the 4.5x loan-to-income cap bites, freeing more smaller lenders to offer higher LTI loans. A permanent government-backed 95% mortgage guarantee should also keep high-LTV products available.
What Might Happen to Rates in The Future?
Markets and economists see limited cuts from here in 2025, with many expecting just one more 0.25 percentage point reduction before year-end, then a slower glide path in 2026. The BoE itself says further moves depend on inflation and wage data. Some forecasters see the Base Rate getting closer to 3% in 2026, but that is not a promise.
Treat it as a winding path downhill for the foreseeable future.
Looking to Buy or Sell Soon?
If you are looking to move home, whether buying or selling, and wondering if this is the time to do it, the short answer from us would be, yes.
The Base Rate shows little sign of significant movement either up or down, likewise, house prices are unlikely to see great shifts any time soon. So now seems like a good time to move with a limited amount of risk – and given that we seem to be living in riskier times – that is certainly a good thing.
Our top tip for sellers? Be realistic about your asking price. Don’t get locked in the mindset that property values must increase significantly all the time. Think about the right home, in the right location, at the right time of your life. Knocking a few thousand off an asking price is worth every penny, if you end up in your dream home.
If you are looking to buy, sell or even rent, get in touch with Grace Miller today. We’re a trusted, independent estate agent and offer free advice from our 25 years in the UK property market.
