On 8 May, the Bank of England voted 5-4 in favour of slashing interest rates from 4.5% to 4.25% in a move widely welcomed by industry analysts and mortgage owners. Bank of England Governor Andrew Bailey released a statement emphasising moderation in line with previous committee meeting statements: ‘The past few weeks have shown how unpredictable the global economy can be. That’s why we need to stick to a gradual and careful approach to further rate cuts’. Yet there is a sense that this cut, which saw two committee members, Alan Taylor and Swati Dhingra, voting for an even greater reduction to 4.0%, marks an exciting moment for the property market.
Mortgage Affordability
Acquiring a mortgage is becoming increasingly more accessible for consumers, which had previously acted as a hurdle due to the high interest rates across the mortgage market. The average mortgage payment is now going to cost £29 less per month. Approximately 600,000 homeowners have a mortgage that aligns with the bank rate, meaning that this interest rate reduction is going to be immediately felt by many mortgage owners.
It is important to note that, from August 2023 to August 2024, the Bank of England only slashed interest rates once from 5.25% to 5.0%, concerned that the UK’s economic landscape wasn’t conducive towards lowering borrowing costs. Yet from September 2024 to May 2025, in a comparatively shorter space of time, the Bank of England has slashed interest rates three times from 5.0% to 4.25%.
Richard Donnell, executive director at Zoopla, argues that the 8 May interest rate cut ‘is welcoming news for people looking to sell and buy homes in 2025. It will provide a boost to market sentiment and filter slowly into lower mortgage rates as the cost of fixed-rate mortgages already reflects future cuts in the base rate. This, alongside reforms to mortgage regulations announced recently, will help boost buying power’.
Even prior to the 8 May interest rate cut, mortgage lenders ranging from Santander, Halifax, and Barclays were steadily lowering a number of mortgage schemes. Yet Nationwide has taken the initiative in lowering two-year tracker products by up to 0.25%, aimed at ‘ensuring we are well-positioned to support both new and existing customers who are currently looking for a new mortgage deal and follow the rate cuts made earlier this week which focused more on first-time buyers and home movers’.
Sarah Thompson, managing director at Mortgage Scout, emphasises that ‘if rates continue to fall towards the predicted 3.5% by year-end, we expect even greater momentum to build across the market’.
Market Activity
Such momentum is crucial. The OBR forecasts that property exchanges in the fourth quarter of 2025 will be 296,602, up from the projected 272,700 in the second quarter of 2024. Rightmove has remarked that listings on the platform have reached a 10-year high, with property listings up 7% compared to the same time last year.
Particular regional markets have also seen greater increases in buyer activity: Cheshire by 5.4%, Worcestershire by 5.1%, Essex by 5%, Leicestershire by 4.9%, and Greater London by 3.5%. Nathan Emerson, CEO of Propertymark, argues that ‘this is a sign of sustained confidence in the UK’s housing market following a recent stamp duty surge in homebuying, and it should give those sellers hoping to take advantage of the traditionally busier spring and summer months motivation to move up the housing ladder’.
Zoopla forecasts that UK house price inflation, informed by a projected 5% increase in the volume of sales compared to the previous year, is set to slide from 1.5% to 1% within the next few months. Elsewhere, Zoopla has identified a 1.6% annual increase in property prices, a 1% increase in buyer demand, and a 12% increase in housing supply. Noteworthy is the property price growth in cities such as Belfast at 6.0%, Liverpool at 3.1%, Newcastle at 2.7%, Manchester at 2.6%, and Birmingham at 2.3%.
Iain McKenzie, CEO of The Guild of Property Professionals, said: ‘Despite global uncertainties, mover activity remains resilient, and with strong housing supply and sales agreed up year-on-year, the market is adapting well.’ McKenzie adds that the lowered interest rates ‘will further underpin confidence, supporting the forecast of a 5% uplift in sales volumes this year, particularly as we see the time to sell quickening. It’s a clear green light for those considering a move’.
Overall Impact of the Lowered Interest Rates
Interest rates – previously a major roadblock throughout the past few years – are steadily declining. In many respects, it directly contributes towards consumer demand, property prices, and ultimately property sales, three of the most important metrics in the property industry. The 8 May interest rate cut signals a positive direction for the property market, and it is facilitating mortgage lenders to follow suit in offering more affordable mortgage schemes, the effects of which will reverberate throughout the property market.
