The Bank of England (BoE) cut interest rates by 25 basis points to 4.75% on the 7th of November 2024. This move reflects “continued progress in disinflation.” The BoE’s Monetary Policy Committee (MPC) decided to lower interest rates to 4.75%, with the decision reached by a vote of 8 to 1. After reducing interest rates in August for the first time in four years, the BoE left rates unchanged in September. The only dissenting MPC member, Catherine Mann, was in favour of keeping the rate at 5%.

The Bank of England also stated that it would take a “gradual” approach to future rate cuts, considering “significant uncertainties” regarding the future path of the labor market and inflation. The BoE stated, “We need to ensure inflation remains low. Therefore, we will not reduce rates too quickly or by too much.” If the economy develops as expected, rates are expected to continue decreasing gradually.

This rate cut comes after last week’s budget announcement and Donald Trump’s election as President of the United States. These developments are expected to put upward pressure on inflation. The BoE forecasts that the budget will increase GDP by about 75 basis points within a year, while its impact on inflation is estimated at around 50 basis points.

Industry experts indicated that today’s rate cut demonstrates the Bank’s confidence and that this will reassure buyers, encouraging them to continue with their property plans. However, it is also suggested that the Budget may slow the pace of future rate cuts.

Industry Commentary

• Richard Donnell (Zoopla): The rate cut will positively impact property sales. Lower mortgage rates will increase buyer demand and support sales through 2025.
• Gareth Lewis (MT Finance): The rate cut will stimulate economic activities and encourage investors.
• Amy Reynolds (Antony Roberts): The rate cut will encourage buyers and sellers to make more transactions. Additionally, as market uncertainty decreases, buyers will be able to act more comfortably.

Market Expectations and the Impact of the Rate Cut

• Guy Gittins (Foxtons): The rate cut will boost morale among home buyers and could bring buyers who had previously withdrawn back to the market.
• Stephanie Daley (Alexander Hall): The rate cut will increase confidence in the mortgage market, potentially accelerating buyers’ decisions.
• Jonathan Samuels (Octane Capital): The rate cut is expected to attract buyers to the market by making mortgage payments more affordable.

Budget Impact and Future Expectations

• Robert Sadler (Excellion Capital): The recently announced Budget could increase government borrowing, which may limit further rate cuts.

Expected Changes in the Market

• The rate cut will create optimism in the markets and boost sales.
• Government policies following the Budget could prevent further reductions in interest rates.