Landlords with buy-to-let mortgages who are about to come out of short-term fixed-rate deals or on a variable rate will be relieved today after the Bank of England cut its base lending rate to 5%.
This is a cut of 0.25% of its previous rate by the bank’s Monetary Policy Committee which voted through the change by a narrow margin of five for the cut, and four against.
Giving its reasons, the committee which is chaired by Andrew Bailey (main image, inset), said its target of 2% inflation had been achieved during the early months of the summer but that medium-term inflationary pressures were still a risk and the it expected the headline figure to rise during the second half of this year before stabilising.
“Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further,” the minutes of the meeting reveal.
“The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.”
Gavin Richardson (pictured, left), MD of broker MFB, says: “Although earlier than most experts predicted, today's Base Rate reduction news is a positive step for property investors.
"While many buy to let lenders have already priced a reduction into their rates, this is a strong indicator that mortgage interest rates will continue to reduce, alleviating rent-to-interest calculation stress and yield suppression for many landlords.
"A welcome change, today is asignificant turning point in what has been a volatile period for property investors."
Matt Smith (pictured, right), Rightmove’s mortgage expert says: “The highly anticipated rate cut has finally arrived, and while those looking to take out a mortgage soon shouldn’t expect to see drastically lower mortgage rates, we would expect the downward trend we’ve started to see continue.
“This sets us up for hopefully further cuts to come, and when we have seen further reductions to the Base Rate, people should really start to see the impact.
“However, it’s important to keep in mind that mortgage rates are widely expected to eventually settle at higher levels than previously, with the market view that the base rate may eventually fall to about 3.25%."
Andrew Lloyd, MD of conveyancing platform Search Acumen, adds: “The Bank of England's decision to cut interest rates today marks a significant turning point – the first base rate cut since 2020.
“The tide is now turning, signalling a shift in economic strategy that many hope will revitalise investment in real estate.
“For investors, this rate cut offers a glimmer of hope after a prolonged period of caution. Lower borrowing costs, along with more political stability now the election news has settled, should help to stimulate activity and encourage new acquisitions, too.
“If rates continue to decrease, we will see increased liquidity in the market as investors reassess their portfolios in light of more favourable financing conditions.” The next interest rate decision is due on the 19th September.
Read the BoE's meeting minutes in full.
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