The Bank of England has cut its base rate to 4.5%, down from 4.75%.
Seven members of the Bank’s Monetary Policy Committee opted for a 0.25% cut, with two preferring 0.50% reduction – suggesting further reductions could be on the horizon.
Andrew Bailey, Governor of the Bank of England, said more rate cuts are likely but a “gradual and careful approach to monetary policy remains appropriate”.
Peter Stimson, head of product at the mortgage lender MPowered, said: “What matters here is not the decision, it’s the vehemence with which it was taken.
“The markets had regarded a 0.25% rate cut as a nailed-on certainty. But what has raised some eyebrows is the strength of feeling among the Bank of England’s ratesetters.
“The only two dissenting voices on the Bank’s nine-member committee wanted to cut more, not less, off the Base Rate.
“All of which will lend credence to the idea that a flurry of further base rate cuts could be on its way. The swaps curve – which ultimately determines how lenders price their mortgages – is currently suggesting that we could see a further three base rate cuts by this time next year.
“Swap rates can ebb and flow, but nevertheless the fact that the markets are now anticipating three more cuts should enable lenders to start trimming the rates they offer customers.
“January is traditionally a time of intense rate-cutting as lenders slug it out for market share, but last month’s competition was relatively subdued. That could now change.”
The Bank of England halved its growth forecast for 2025, from 0.75% to 1.5%.
Jonathan Hopper, chief executive of Garrington Property Finders, said: “The prospect of cheaper mortgages will give a decisive nudge to thousands of would-be buyers who kept their powder dry in 2024.
“In normal times a reduction in borrowing costs can prompt those planning a move to inch up their budget, and the result tends to be rising house prices. This time, not so much.
“While there is plenty of demand from buyers, the abundance of homes for sale is keeping price inflation in check.”
