"Many will breathe a sigh of relief"
- Iain McKenzie, The Guild of Property Professionals
The committee said that current inflation figures and the improved economic outlook for the rest of the year mean that 'it is now appropriate to reduce slightly the degree of policy restrictiveness', although it also warned that monetary policy would need to remain restrictive to ensure inflation could return 'sustainably' to its 2% target.
The decision was split, with five members of the committee voting to reduce the rate and four voting against, preferring it to remain at the previous rate of 5.25%. The last reduction in base rate took place in 2020 amid the Covid-19 outbreak.
Iain McKenzie, CEO of The Guild of Property Professionals comments:
“Many will breathe a sigh of relief following the Bank of England’s decision to cut the rate from a 16-year high of 5.25%. The cut will have a positive impact for both mortgaged homeowners and loan-dependent prospective buyers alike.
"While headline inflation fell to the Bank’s target of 2% in May, the decision to cut the rate was delayed due to services inflation remaining stubbornly high. While services inflation is still high, the BoE is looking at the long-term and economic growth.
"Despite the elevated interest rate environment we have experienced over the past few years, a more optimistic overall economic outlook continues to have a positive impact on confidence in the market. While many adopted a wait-and-see approach in the period running up to the general election, it is expected that we should start to see transactions levels improve in the second half of the year. The rate cut should be a further shot in the arm for the market.”
Sam Mitchell, CEO of Purplebricks, said:
“The housing market is finally kicking back into action following a pause for breath around the General Election. The Bank of England’s decision to cut interest rates today will supercharge this recovery.
"Already, buyers are leaving the market lull behind to forge ahead with purchasing decisions. However, for first-time buyers, the primary challenge remains firmly in place: the rental market is still a complete mess. Labour will need to push ahead with their plans to ‘get Britain building’ and construct more social housing if it’s to lower the barriers to homeownership for first-time buyers. The hope is that these measures, when combined with rates coming down for landlords, should make the rental market more bearable for tenants and help them save for a deposit to finally become a homeowner.”
Tim Bannister, Rightmove’s property expert said:
“This year we’ve seen signs that more people have adjusted to higher mortgage rate levels and generally, if they can, have been getting on with moves. The property market has been resilient, and even through the uncertainty of the recent election campaign, we saw home-moving activity continue on trend. Whilst I wouldn’t expect today’s Base Rate cut to lead to a rush of activity – as mortgage rates are still high and won’t drop significantly in the short term – it is likely to have a positive impact on home-mover sentiment which bodes well for the Autumn selling season.”
