Is this the start of a broader easing trend?
The Bank of England (BoE) has reduced its base interest rate by 25 basis points from 4.5% to 4.25%, in response to mounting uncertainty in global trade and signs of slowing economic momentum.
This marks the second rate cut by the Monetary Policy Committee (MPC) this year, following a similar move in February. The central bank began easing rates in August 2024, a trend that has offered some relief to mortgage borrowers as lenders gradually adjust pricing.
Market observers now anticipate the BoE could trim the base rate further, potentially bringing it down to 3.5% by the end of the year. This would represent a quicker path of monetary easing than earlier BoE forecasts, which pointed to a more measured approach.
While today’s rate cut was largely anticipated, some economists had forecast a more aggressive 0.5-point reduction. March inflation data supported the central bank’s decision, with the annual rate falling to 2.6%, lower than both February’s figure of 2.8% and the BoE’s earlier predictions. A temporary rise in inflation is expected over the summer due to higher food and energy costs, but broader indicators suggest that pricing pressures are easing.
“The Bank of England’s decision to cut the base rate by 0.25 percentage points reflects a pragmatic response to the shifting economic landscape,” commented Nicholas Mendes, mortgage technical manager at John Charcol. “Recent data has pointed to softening momentum both at home and abroad, and there is little doubt that ongoing global uncertainty, particularly around trade, has started to weigh more heavily on the outlook. With inflation coming down faster than expected and signs that the labour market is beginning to ease, there is a clear case for acting now rather than risking a more abrupt response later.”
Mendes said the rate cut brings some relief for mortgage holders, particularly for those on tracker and variable-rate products, who should see an immediate reduction in monthly repayments.
“While fixed rates have already priced in much of this decision, the cut will support sentiment in the housing market at a time when affordability has been stretched and buyer activity has slowed,” he added. “It also gives lenders a bit more breathing room to remain competitive, which could help stimulate demand, especially among first-time buyers.
“That said, this is unlikely to mark the start of a rapid easing cycle. Wage growth remains strong, fiscal changes are still filtering through, and services inflation is well above target. The bank will need to tread carefully from here. While today’s cut is helpful, borrowers should continue to plan with caution. Locking in a competitive fixed rate still makes sense for many, particularly if there is any doubt about future income or affordability.”
Any thoughts on the latest base rate decision announced by the Bank of England today? Share them with us by leaving a comment in the discussion box at the bottom of the page.
