The Bank of England Cuts Base Rate: What It Means for the South London Property Market

The Bank of England has just reduced the base interest rate by 25 basis points, bringing it down from 4.5% to 4.25% (BBC).

It isn’t a surprise. 

In fact, two members of the MPC voted for a 0.5% cut today – that is quite interesting…

It is a move designed to stimulate a national economy that has been dampened amidst global tensions around trade, in light of Trump’s tariffs – the effect of which I have written about recently (see article here) – leading to reduced forecasts for domestic growth.

A Timely Boost for a Cooling Property Market

In property market terms – nationally, in fact, but including the South London property market – today’s rate-cut comes at a useful time, particularly in light of reports from the Royal Institute of Chartered Surveyors (RICS) this week about a recent cooling-off of property market activity.

Data from the RICS indicates a slowdown in the UK housing market in general, with buyer demand declining significantly in April – presenting a net balance of -37% in their report this morning. And that reduced demand has led to a reduction in agreed sales.

Now, at Your Home Managed we deal with Lettings and Property Management, of course, but the above matters because that slowdown does also mean fewer lettings properties are being brought to market, as fewer investors look for those residential or HMO properties to let out.

This is why we keep an eye on property market movement, and why we think it is worth relaying it to you.

The RICS attributes the recent slowdown to the end of the stamp duty holiday in particular, but I have no doubt that we have also been impacted by general raised costs of living, as well as doubts and concerns that have seeped into our collective psyche from global ‘headline news’ events, and of course from increased mortgage rates.

Mortgage rates are not historically high, as people of my generation know only too well (this is not my first rodeo…), but nevertheless they are higher than a swathe of homeowners had become accustomed to for a long period of time, from 2008 until around 2022.

This is why those coming off the three year fixed rate mortgages they took out in 2022 are looking nervously at mortgage rates right now.

For those people, today’s base interest rate news will come as a relief. 

The Property Market in South London

Here in South London we have observed similar trends. The market has experienced a lull, with fewer buyers entering the fray since the end of March.

I do expect this base rate cut to serve as a catalyst to reinvigorate interest amongst some buyers – but I also suspect it is not the last base rate cut we will see this year.

Many economists, analysts and big banking institutions had forecast three or even four more cuts this year. The chances of reaching a 3.75% Bank of England base rate by the end of the year I personally consider to be quite likely, and some are predicting 3.5%.

This is why some borrowers are opting to take Tracker Rate mortgages as opposed to fixing for two, three or five years.

Impact on Mortgage Rates and Affordability

A lower base rate often leads to reduced mortgage rates, making borrowing more affordable for potential homeowners. However, we have already seen mortgage lenders competing for business by reducing product rates recently, with a number now available below 4%, and even in the buy to let sector we have seen rates touching the 5% mark again.

Today’s cut should give lenders some confidence to hold the rates they have set recently, and might encourage some to perhaps go further. In saying that, whilst I expect to see a few more headlines about lower mortgage rates, I think the actual cuts to mortgage rates from where they currently are will be modest.

With more headline rates dipping below 4% however, this could particularly benefit first-time buyers and those looking to upsize, as monthly repayments become more manageable – something that will be perceived as a bonus by those buyers who missed out on the recently ended stamp duty break.

In South London, property values have edged up reasonably over the last 12 months – by around 3% according to the latest ONS data from February, if I take Lambeth as a yard-stick measure. Improved affordability might attract a new wave of buyers, eager to capitalise on favourable lending conditions and buy into what is widely considered to be a solid and safe marketplace.

The Investor Market

One implication to consider when base rates reduce, is the effect it has on savers. Bank interest on savings also reduces – and when the return that money can get in the bank drops off significantly enough, despite any concerns people might have about being a landlord, related tax implications, stamp duty levies or forthcoming legislation changes, properties as a rental investment start to look quite attractive.

And when we can often see rental yields in South London breaking 4 or 5% - or even 6 or 7% plus for HMOs – it is easy to see why we expect more enquiries from landlords looking to invest money into higher-return investments, when interest rates fall.

Seasonal Considerations

With summer approaching, the housing market typically experiences a slowdown due to major sporting events and then the summer holiday season. That normally brings an end to the more frantic and feverish Spring market – but as mentioned, the second quarter of this year is currently underperforming following that stamp duty holiday ending.

Today’s base rate cut could counter this trend, encouraging buyers to act again in a way that more closely resembles a buoyant Spring-time market – perhaps correcting the pattern ahead of the normal summer lull.

 

Looking Ahead

For South London property owners and house hunters, the base rate cut today is a positive development, but – as I often seem to say – it is essential to approach the market with informed optimism.

Economic factors, including global trade dynamics, continue to influence the broader financial landscape.

For those considering buying or selling in South London, now might be an opportune moment to engage with the market.

If you are in the HMO market in particular, we're here at Your Home Managed to provide guidance and support tailored to your needs if you are already letting out, buying to let, or even if you are considering selling a property in South London.

That guidance really can come long before you start viewing properties or before you have any thoughts of selling – there is no pressure, and frankly we consider it a part of the job.

At the very least it might be worth speaking to a qualified mortgage broker or financial advisor in light of the change to the base rate today – and we can certainly point you in the direction of somebody if you would like some professional advice.