Is this a reset moment – or just a softer landing?
After two bruising years for borrowers, any rate cut is welcome – but the relief now on offer is limited. The OECD expects the Bank of England to trim rates twice more and then hold Bank Rate at 3.5% through the medium term, its lowest level since December 2022 but still far above pandemic lows. That trajectory offers some breathing space for households, yet falls well short of the kind of aggressive easing that would recreate the ultra‑cheap money of bygone years – and brokers on the front line say that distinction is crucial.
“Welcome easing, not a dramatic turning point”
For Katrina Horstead (pictured left), director at Versed Financial, a move from 4% to 3.5% is meaningful – but firmly in the “helpful” rather than “transformational” category.
“For most of our clients, a move in Bank Rate from 4% to 3.5% would feel like a welcome easing rather than a dramatic turning point,” she says. “After a difficult couple of years, any reduction in pricing helps, but people are still adjusting to a world where 3 to 4% is the new normal rather than the lesser rates they remember.”
That sense of recalibration runs through many broker conversations. Borrowers who locked into 1–2% pandemic‑era fixes are still stepping into a very different world when they refinance. A product “in the 3s” can ease the transition, but it doesn’t come close to recreating the conditions they enjoyed before.
“For borrowers rolling off ultra‑low pandemic era fixes, a 3.5% setting would soften the payment shock a little but not remove it,” Horstead says. “Many of these clients are moving from rates that started with a 1 or a 2, so even a well priced product in the 3's can still mean a noticeable increase in monthly costs.”
A “huge psychological boost” – but modest pounds‑and‑pence impact
Bob Singh (pictured right), founder of Chess Mortgages, agrees that the psychological impact of a 3.5% floor could be larger than the immediate financial gain.
“The 3.5% floor represents a huge psychological boost for borrowers of all classes,” he says.
In cash terms, though, Singh is keen to keep expectations grounded.
“For every £1,000 borrowed it saves the client 27p when looking at a 25‑year term,” he notes. “A homeowner borrowing £500k will be £127 per month better off tax free – so not really life‑changing.”
Where the numbers do start to add up more quickly is in the buy‑to‑let space.
“A BTL client however borrowing £500k on interest only will be £208 per month better off before tax,” Singh adds. For landlords already on the edge of interest coverage requirements, that could be the difference between passing a remortgage test and being forced to deleverage or sell.
Fix versus float: fatigue is driving clients to lock in
If 3.5% does become the new floor, brokers expect the product mix to tilt further towards certainty.
“At a 3.5% Bank Rate I would expect the conversation to tilt more towards securing certainty,” Horstead says. “Many clients are already fatigued by constant headlines about rate moves and are keen to know where their payments will sit for the next few years.”
In that environment, she sees strong demand for medium‑term fixes.
“There is usually strong interest in five‑year fixes for stability, with a subset who prefer shorter two‑year terms if they believe rates could drift lower in the medium term and are comfortable with some future repricing risk,” she explains. “Trackers and variables still have a place for more financially flexible clients, but they will likely remain a niche choice rather than the default.”
Singh takes a similar view for landlords in particular.
“Hard pressed landlords will be able to benefit and use the low rates to lock in for longer and not take short term positions,” he says – a sign that in a 3.5% world, many investors may swap tactical plays for longer‑term defensive strategies.
Who actually benefits most?
Both brokers see uneven benefits across their client bases.
Horstead points to first‑time buyers and higher‑LTV borrowers as the most sensitive to even small moves lower.
“In terms of who benefits most, first time buyers and higher LTV borrowers stand to gain from any improvement in affordability metrics and stress tests, although they remain very sensitive to small changes in rate,” she says.
Well‑equipped movers, by contrast, may be best placed to capitalise.
“Established homeowners with strong equity are often best placed to take advantage of cheaper products and a wider choice of lenders,” Horstead adds.
For more complex borrowers, however, the headline Bank Rate is only part of the story.
“Self‑employed clients and those with more complex income profiles are still more constrained by criteria and documentation than by the headline Bank Rate itself, so for them a move to 3.5% is helpful but not transformative on its own.”
Singh, meanwhile, highlights two groups that could see the most tangible day‑to‑day relief if rates move down and level off: “Lower interest rates will benefit the property market especially hard‑pressed first‑time buyers and those coming off ultra‑low fixed rates and dampen the shock,” he says.
A gentler landing for landlords – and the market
The buy‑to‑let sector, already squeezed by higher borrowing costs and tax changes, stands to gain important breathing room.
“Hard pressed landlords will be able to benefit and use the low rates to lock in for longer,” Singh says. That in turn could help stabilise rental supply and avoid a sharper exodus from the sector – although higher taxes and tighter regulation remain significant headwinds."
Taken together, the broker view is that a 3.5% setting acts more as a shock absorber than an accelerator. It would ease pressure on borrowers and dampen arrears risk, but is unlikely to relaunch the sort of credit‑fuelled boom seen when money was close to free.
For now, the message from the advice community is clear: a 3.5% Bank Rate would be a relief, not a revolution. It buys borrowers time, softens the landing from the steepest tightening cycle in a generation, and gives brokers a more stable backdrop in which to plan – but it doesn’t magic away the hard work of rebuilding household finances after years of rising costs.
