Bank of England cuts interest rates: what does this mean for house prices?

LONDON — The Bank of England delivered its first cut in interest rates in more than four years on Thursday. The key rate now stands at 5%.

Policymakers ultimately voted 5-4 in favour of the reduction, with Governor Andrew Bailey saying that the committee would move ahead cautiously. The Bank rate had been held at a 16-year high of 5.25% since August 2023.

A lack of clear signalling from the British central bank had shrouded the decision in uncertainty until the last minute, even as markets priced in a 61% probability of a 25-basis-point reduction of its key rate at the August meeting as of 8:15 a.m. in London.

UK gilt yields slipped as markets began digesting the Bank of England’s decision and the outlook for interest rates. The yield on the 10-year gilt was last down over 9 basis points to 3.880%, while the 2-year gilt yield tumbled by more than 10 basis points to 3.702%.

The market is looking at the mortgage providers to cut mortgage rates to ease the inflationary pressure on homeowners.

House prices – where will they head?

It is believed that house prices will proceed to edge up with continued confidence in the marketplace as the continued rush to get onto the property ladder along with extended mortgages.
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