Recent reductions in the Bank of England's base rate have significant implications for homebuyers, influencing mortgage options and overall affordability. Understanding these changes is crucial for those navigating the property market.  

Base rate reduction: A catalyst for change 

In February 2025, the Bank of England cut the base rate by 0.25%,* bringing it down to 4.5%.* This decision, aimed at stimulating economic growth amid moderate inflation, directly impacts borrowing costs, including mortgages.  

Impact on mortgage rates 

Following the base rate cut, several lenders have introduced more competitive mortgage products:  

• Sub-4% mortgages: Major banks such as Nationwide and Barclays have launched five-year fixed-rate mortgages with interest rates below 4%, specifically 3.99% and 3.96%, respectively. These offers typically require a 40% deposit and may include product fees.** 

• First-time buyer initiatives: Lenders like TSB have extended their loan-to-value (LTV) ratios, enabling mortgages up to 95% LTV for new-build properties. This move enables buyers with smaller deposits to enter the housing market, though higher interest rates may apply.** 

Affordability and buyer activity 

The reduction in mortgage rates improves affordability for homebuyers:  

• Increased buyer interest: Following the base rate cut, there has been a notable uptick in buyer activity. The number of potential buyers contacting estate agents has risen by 19% compared to the same period last year, indicating renewed confidence in the housing market.* 

• Stable house prices: While mortgage rates have decreased, house prices have remained relatively stable promising a more favourable environment for buyers.  

Considerations for homebuyers 

Prospective buyers should consider the following:  

• Fixed vs. variable rates: While fixed-rate mortgages promise stability, variable or tracker mortgages might provide cost savings if further rate cuts occur.  

• Total mortgage costs: Beyond interest rates, you also need to consider associated fees and the overall cost over the mortgage term.  

• Financial readiness: Ensuring a high credit score and a manageable debt-to-income ratio can improve mortgage eligibility and access to better rates.  

Seizing the opportunity 

The recent base rate cut has improved the chances of homebuyers securing more favourable mortgage terms.  

Start your homeownership journey today 

Rightmove* Zoopla**