Bank of England’s Rate Cut to 4%: A Boost for the Property Market

The Bank of England has cut the base interest rate to 4%, its lowest level in over two years, to stimulate economic activity. This quarter-point reduction marks the fifth rate cut since late 2024, bringing borrowing costs to their lowest point in about two years.

Property and finance experts have welcomed the decision as a much-needed stimulus for the housing market. At Attwells Solicitors, we see this as a positive development for homebuyers, as it will make buying a home more achievable for first-time buyers, and as a direct result enable second-time buyers to move.

What Happened and Why the Rate Was Cut

The Bank of England’s rate cut was approved by a narrow 5-4 vote of the MPC. Several factors drove this decision. The UK economy had stagnated in late 2024 and grew only 0.7% in early 2025, while inflation (about 3.6%) remained well above the Bank’s 2% target and unemployment climbed to its highest in four years. By lowering the base rate to 4%, the Bank aims to reduce borrowing costs for households and businesses and bolster economic growth.

Whilst the immediate effect on mortgage interest rates may be modest, many fixed-rate mortgage deals had already factored in expectations of a cut, but the psychological and practical impacts are significant. Buyer confidence is on the rise, and sentiment in the housing market has received a palpable boost.

Mortgage lenders are expected to respond by trimming their rates further for new loans. As Rightmove’s mortgage expert Matt Smith explained, lenders will use the base rate cut as a catalyst to reduce mortgage costs “a little more,” which “bodes well for the second half of this year”.

Santander Unlocks Higher Borrowing Power

Alongside the Bank’s move, Santander has announced an important update to its loan-to-income (LTI) policy. Under the new rules, borrowers earning £100,000 or more can now access mortgages up to 5.5 times their income – an increase on previous limits. This shift has the potential to “unlock” the market for higher earners, particularly those struggling to move up the ladder in expensive areas where affordability has been stretched.

However, the changes are not across the board. The higher LTI multiples will not apply to loans where borrowers are taking on more than 85% loan-to-value (LTV), which means buyers will still need a substantial deposit to access the benefit. Even so, the move reflects growing confidence from lenders that conditions are improving – and, when combined with falling base rates, it could open the door for more ambitious borrowing.

For professionals and households on strong incomes, this means greater flexibility to buy larger properties or secure homes in higher-value locations. In practice, Santander’s policy change works hand in hand with the Bank of England’s rate cut cheaper borrowing costs and more generous affordability assessments both boosts purchasing power, giving movers more confidence to take their next step.

Property Market Outlook

At least one more Bank Rate cut is anticipated before the end of the year (with a chance of two), and each cut could encourage more buyers to enter the market or upscale their plans. Stable or gently rising house prices, combined with cheaper financing and the new Santander lending boost, are likely to spur more transactions in the coming months.

There are already signs of renewed activity. Estate agents report unseasonably strong levels of buyer interest, and the number of homes for sale is at its highest in seven years. Importantly, tweaks to mortgage affordability assessments in recent months have increased what buyers can borrow by roughly 20% even without rate changes. Santander’s update strengthens this trend further, making it easier for those with higher incomes to stretch their budgets.

That said, experts caution that these changes, while extremely positive, are not a cure-all for the market’s challenges. Inflation is still above target, which means the Bank of England will remain cautious in its next moves.

As Property mark CEO Nathan Emerson noted, the news is “very welcome for many buyers and sellers who may be empowered to potentially borrow more to finance their next house move” – especially those moving up the property ladder – “but inflation is still above the Bank’s target rate”.

Final Thoughts

In short, the outlook is optimistic but calls for measured expectations. The Bank is likely to continue cutting rates at a slow pace if conditions allow, and analysts predict interest rates could fall to the low 3% range or even towards 2% over the next year if inflation comes under control.

For now, though, the 4% rate and Santander’s lending boost are seen as strong signals of intent: policymakers and lenders want to support the housing sector and broader economy, while avoiding any return to runaway prices.

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