The Final Base Rate Cut of 2025?
The Base Rate has been cut for the 3rd time this year. What does this mean for mortgage rates, and why do we not expect further Base Rate reductions this year?
MFB's View
In August, the Bank of England has announced a 0.25% cut to the Base Rate (BBR), bringing it down from 4.25% to 4%. This marks the third cut of the year and suggests that the Bank of England is reacting to the slower-than-expected economic growth and the quieter housing market.
Why Has the Base Rate Been Cut?
The Monetary Policy Committee's (MPC) decision to cut rates comes off the back of clear signs that the economy is slowing and the job market is starting to soften. Inflation remains above the 2% target but has eased significantly from its peak, which has given the Bank some breathing room to reduce BBR this year.
While remaining cautious, the August reduction shows the Bank is leaning towards making borrowing slightly easier. That said, no further cuts are expected for 2025, especially with growing pressure on Rachel Reeves to raise taxes in the Autumn Budget to boost household spending and balance the books.
For investors on tracker or variable-rate mortgages linked to the Base Rate, today's announcement will reduce mortgage payments once more.
Fixed-rate mortgage products are priced in line with SWAP rates, not the Base Rate. As SWAPs have remained steady on their slow, downward trajectory, mortgage lenders have already priced in today's BBR cut.
Click here for a detailed explanation on how SWAP rates price mortgage rates
Therefore, it's unlikely that we will see a significant change in fixed-mortgage rate pricing over the coming weeks.
Expert Advice for LandlordsWhile we don't anticipate a surge in fixed-rate mortgage reductions, a wide range of competitive mortgage products is currently available on the market.
>> Explore the best buy to let rates on the market
Many landlords have been holding off on securing their next mortgage, hoping to see the Base Rate come down further. However, as mentioned, SWAP rates impact fixed-rate pricing, not the Base Rate.
If you have been putting off your refinance plans, it's essential that you review your options now. It's likely that you're on, or approaching, your lender's Standard Variable Rate (SVR), which is much more expensive than current buy to let rate pricing. Therefore, by securing a new product, you can save a significant amount of money on your monthly mortgage payments.
Don't forget that most (although not all) lenders let you secure a new rate up to 3 months in advance and let you switch if a better rate becomes available before you complete. That way, you've hedged your bets and won; if rates come down, you can still access competitive deals, but if they've increased, you've secured current rate pricing.
If you call our team, our expert brokers will review your current mortgages and show you the competitive pricing you could access if you refinance, with no obligation to continue.
No strings, just expert advice. Call us on 0345 345 6788 or send us an enquiry here and one of our experts will get back to you.