UK Housing News
What Does The Bank of England's Cut In Interest Rates Mean For The UK's Property Market
David Hannah, Group Chairman of Cornerstone Tax, highlights the impact of today’s announcement on Britain's property industry
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Today, the Bank of England voted to cut the base rate of interest to 4.5% - the third cut in interest rates since the start of the COVID-19 pandemic and the first cut of 2025. According to David Hannah, Group Chairman of Cornerstone Tax - the UK’s leading stamp duty advisory - high interest rates have impacted the UK's property market to an enormous extent. This has resulted in burdensome mortgage costs for first-time buyers, the collapse of supply within the private rental sector, unprecedented increases in rental and home-buying costs, as well as a record number of landlords leaving the market due to the soaring costs of managing their properties.
The decision today from the BofE does come as welcome news, however, David argues that the monetary policy committee must aim for a 3-3.5% base rate to stimulate private development, incentivise first-time buyers and restart the private rental sector. David also offers expert analysis below on how today’s announcement impacts Britain's property industry.
First-time buyers:
"First-time buyers have been, for the time being, largely unaffected by the changes however the proposed reduction in the thresholds of SDLT in March 2025 has accelerated many people's intention to purchase and it could well be that we see a “cliff edge” in transactions. Against still high interest rates at 4.5%, affordability is still one of the key issues for first-time buyers."
The residential property sector:
"The residential property sector has performed adequately against the headwinds of affordability, stamp duty changes, fundamental uncertainties in the treatment of larger properties with land, and a variety of other non-stamp duty factors. However, the damping down of this sector and the lack of upward mobility created by the tax cost of purchasing a larger home, has led to a much-reduced rate of construction in starter and mid-market homes. This has helped to buoy prices and offset a potential fall in asking prices caused by the cost-of-living crisis. Unfortunately, the market is still relatively dormant awaiting further interest rate cuts on the affordability front, which is what is necessary to get the market moving at a healthy pace."
The UK's building patterns in 2025:
"Overall, the UK's building patterns in 2025 have been disrupted by high interest rates and a lack of working capital. This has led to a lower-than-expected number of new builds, down 10% since the new government entered power. Cornerstone urges the government to reverse its negative homebuilding policies which are clearly impacting its ambitions to build 1.5M homes "
David Hannah, Group Chairman
