UK interest rates fall to 4.25% following the latest Bank of England cut
- Tailor My Property
- May 13
- 3 min read
The Bank of England has reduced its key interest rate from 4.5% to 4.25% in response to slowing domestic economic growth and uncertainty around the fallout from US President Donald Trump’s tariff announcements.
The latest news from the Bank was widely expected, with inflation cooling to 2.6% in the twelve months to March, and is the fourth cut since last August, but it came alongside a warning that the UK economy is expected to slow by a further 0.3% over the next three years.
Are more cuts expected soon?
Economists have varying projections for future rate cuts but some expect at least two further quarter-point cuts in borrowing costs this year. However some analysts warn that inflation risks, particularly from rising wages and energy prices, could limit the pace of potential cuts with some predicting that inflation will remain above the 2% target well into 2026.
The UK and US negotiate new trade agreements following tariff fallout
According to the Bank the latest decision to cut interest rates was influenced by current global tariff tensions and did not take into account the newly proposed deal between the British government and the United States, which was confirmed just hours later in a conjoined effort to avoid tariffs on certain goods in order to boost trade.
As a result of the latest deal the UK has reduced a 27.5% charge on exports of cars and a 25% charge on steel and aluminium, in exchange for concessions in some sectors including agriculture.
How do the cuts influence the property market?
The Bank's base rate cuts have far-reaching consequences for financial and property markets, including mortgage rates offered by lenders, and are the Bank's main tool in trying to maintain the annual rate of inflation at, or close to, its target of 2%.The higher rates in recent years have meant that buyers are paying more to borrow money for things like mortgages and credit cards.
In the UK around 600,000 homeowners have a mortgage that tracks the Bank's rate, so rates being cut will have an impact on monthly repayments and make life more affordable for many struggling to maintain or purchase homes in a stagnant domestic economy. The most recent UK inflation figures show prices rose 2.6% in the year to March, and the rate is expected to jump following a series of household bill increases at the start of April, including energy and water prices.
How will mortgage rates be affected?
The latest reduction in the Bank of England’s base rate will be good news for anyone looking to buy a new home and get a cheaper “fixed-rate” mortgage deal from a bank or lender, or for those remortgaging and looking for new deals after their fixed-rate term expires.
Of the total number of fixed-rate deals around 1.6 million will end in 2025, meaning the latest drop in the Bank of England’s key rate will be good news for those hoping to find a new offer.
Lower interest rates offer exciting opportunities for the UK property market, whether you’re a first time buyer or a seasoned property investor, now might be the time to make a move and grow your UK property portfolio. Tailor my Property has a network of expert finance and property professionals who can advise you to ensure you move in the right direction for your personal, financial and property goals.
Comentarios