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How will a potential rate cut impact UK borrowers?

Journalist: Newsteam, Newsteam

ended 16. September 2024

Wheather it happens this week or not, another rate cut by the Bank of England is widely expected before the year is out. With this in mind, Newspage asked brokers, economists and property experts how a rate cut will affect existing mortgage holders, what it could mean for house prices and what potential obstacles lie ahead. Their views are below.

8 responses from the Newspage community

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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
With the spectre of recession not entirely banished, economic fragility could prompt the Bank of England to accelerate its timeline for monetary easing. Following the latest GDP figures falling short of expectations and the UK’s factory output dropping for the first time in four years, the BoE may need to recalibrate its position, speeding up the transition to a dovish stance. The BOE's August signals of further cuts were tempered with caveats about limited recession risks and stubborn inflationary pressures. However, as Chancellor Reeves sharpens her fiscal scalpel, looming budgetary tightening combined with tax hikes on the horizon could dampen economic growth, potentially necessitating more aggressive easing. While the prospect of lower rates offers a glimmer of hope for Britain's beleaguered borrowers, the coming months will reveal whether the potential dovish pivot is indeed a watershed moment for the mortgage market or merely a false dawn in these turbulent economic times.
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Darryl Dhoffer
Founder at The Mortgage Geezer
The BOE's slow reaction to the deteriorating economic situation is a damning indictment of its leadership. The central bank's refusal to cut interest rates aggressively is a reckless gamble that could have catastrophic consequences for the UK economy. It is time for the BOE to abandon its outdated policies and take decisive action to protect the nation's financial well-being, and act now to cut interest rates.
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Craig Fish
Director at Lodestone Mortgages
If history has anything to teach us, it's that the Bank of England's Monetary Policy Committee are normally too late with their decisions, and often dither at even the most obvious ones. I therefore firmly believe that the first cut will be in October and another in December, after which there will be a pause to gauge the impact. The message therefore is that if you are a borrower and in need of a mortgage, do what is right for you based on your circumstances using the guidance of a good broker, and above all don't delay.
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Simon Bridgland
Director at Charwin Private Clients
The change for borrowers will still be a slap in the face even after a drop in the base rate. The jump to a new rate could easily be between 1-3%, this translates into hundreds of pounds of higher monthly payments. The smart cookies would have been preparing themselves for the shock, by perhaps paying down any other personal debt and not taking out any unnecessary credit, even then, it can take a real life-adjustment to stay on top of the finances. Recent reductions in the cost of fixed money, has fuelled the property market and help to maintain prices and with fixed money looking likely to get cheaper still, I can only see property becoming more attractive. Some borrowers have decided that tracker rates are worth a look to take advantage of base rate moving south, but with a budget on its way that could spook markets, a tracker deal could trip you up later on.
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Elliott Culley
Director at Switch Mortgage Finance
The current predictions are expecting more rate cuts before the end of the year. This is already having a impact in the mortgage market as rates have been dropped far more aggressively by mortgage lenders. Fixed rates are usually ahead of the curve and will start to improve based on future predictions. We have already seen a new milestone, with the first 2 year fixed rate under 4% and we should expect further milestones this week as lenders compete. Borrowers should remember these are only predictions and the economic outlook can change quickly, so best to be prepared and take advantage of the rates whilst they are here.
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Kim McGinley
Director & Specialist Broker at VIBE Finance
A base rate reduction by the Bank of England this Thursday would be great news for first-time buyers and those looking to remortgage or move home. For first-time buyers, a lower base rate could translate into more competitive mortgage rates, making monthly payments more affordable and easing their path onto the housing ladder. With the doom and gloom of the Autumn Budget around the corner, it's now a question of whether the Bank of England is bold enough to make this move.
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Graham Cox
Director at Bridging Hub
The Bank of England have been as slow to cut rates as they were to raise them when inflation hit. The UK economy is stagnating, with no growth in the last 2 months. Further delay risks tipping the UK economy into recession again so the MPC must act fast. Two 0.25% base rate cuts before the end of the year would kickstart growth and stimulate the housing market by helping first time buyers.
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Patricia McGirr
Founder at Repossession Rescue Network
A Bank of England rate cut might feel like a ray of hope, but let’s not get ahead of ourselves. For existing mortgage holders on fixed rates who locked in during the height of the interest rate hikes, this won’t be an instant win. Variable rate holders may breathe easier with the promise of some relief, but the bulk of homeowners won’t feel the benefit until their renewal, which could still come at a premium.

When it comes to house prices, a rate cut could stir up some demand, but don’t expect fireworks. The real barrier is deeper. Wages aren’t keeping pace with inflation, and affordability is stretched to the max. The biggest obstacle? A fragile economy still reeling from cost-of-living pressures. Any so-called ‘relief’ will be slow, uneven, and probably underwhelming.