What could a lower Base Rate mean for homemovers?
The Bank of England (BoE) has announced that it is cutting its Base Rate by 0.25% to 4%, the lowest level for over two years.
In a statement released on 7th August 2025, the Bank announced that the Monetary Policy Committee (MPC) had voted by a majority of five to four to reduce Bank Rate by 0.25 percentage points.
Although the BoE’s decision will come as welcome news for homeowners, it reflects a ‘gradual and careful’ approach from the MPC to combating inflation and managing its Base Rate.
The current inflation rate is 3.6%, while the government’s inflation target remains at 2%. In reaching its decision, the MPC noted that there has been substantial disinflation over the past two and a half years.
This has been largely driven by the Bank’s restrictive stance regarding monetary policy, which has allowed for a gradual reduction in the Base Rate.
The MPC noted that while CPI inflation is forecast to increase slightly to peak at 4.0% in September, it is expected that inflation will then begin to fall towards its 2% target.
However, the Bank continues to remain cautious in its approach to reducing base rates, as highlighted by the close five-to-four divide between MPC members in agreeing to this latest reduction.
For the majority of homeowners, the latest Base Rate reduction will make little difference. The vast majority of mortgages in the UK are on fixed terms.
Monthly mortgage repayments for fixed-term arrangements will not change in light of the new Base Rate.
For borrowers on variable rates or tracker mortgages, the news will be welcome, but the impact on their monthly repayments is likely to be small.
Instead, all eyes will be on mortgage rates over the coming weeks to see how lenders will respond to the lower Base Rate.
First-time buyers, homemovers and property owners with mortgage deals due to come to an end could potentially benefit from lower interest rates if lenders respond optimistically to the latest Base Rate announcement.
Despite increasing slightly during May 2025 and June 2025, 5-Year Swap Rates have continued to gradually fall since January 2025, indicating that lending conditions could improve for home buyers over the coming months.
This is great news for first-time buyers and homemovers who will undoubtedly appreciate the opportunity to take advantage of a more competitive mortgage market.
Mortgage rates have continued to gradually fall during 2025 and are currently at their lowest level since July 2023.
The latest decision by the BoE to further cut its Base Rate could result in lenders further decreasing their mortgage rates, meaning that buyers benefit from even more favourable mortgage terms.
This improved market buoyancy will also come as welcome news for sellers, with strong buyer demand being further buoyed by competitive mortgage rates.
According to Rightmove, the number of potential future buyers contacting estate agents about homes for sale is 6% higher than last year*, so now is an excellent time for sellers to approach the market.
With high demand for property from buyers and increasingly favourable mortgage rates, an active property market could create good opportunities for buy-to-let landlords at both ends of the market.
For those looking to divest assets, the demand for property and relative ease of borrowing should mean that finding a buyer for their property is easier than ever.
Alternatively, savvy investors looking to expand their portfolios should benefit from an abundance of stock combined with access to a more competitive selection of mortgage deals.
Whether you are buying your first home, moving house or expanding your buy-to-let portfolio, Edward Mellor Estate Agents are here to ensure that your property journey runs smoothly.
To discuss how the latest base rate news could impact your property transaction, contact our friendly local teams using the link below.
* Source: Rightmove: House Price Index, July 2025
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