What does the Bank of England’s interest rate cut mean for property?

August 7, 2025

The Bank of England has cut the base rate of interest by 0.25% today. It’s the fifth cut in the last 12 months and takes the rate down to 4%, the same as it was in March 2023.

The decision was not unanimous, but the Monetary Policy Committee overall saw enough in the available data to recommend the cut. It is seen as a benefit for businesses and individuals who wish to borrow, and is a sign of long-term optimism in the UK’s economy.

Andrew Bailey, the Bank’s governor, said: “We’ve cut interest rates today, but it was a finely balanced decision. Interest rates are still on a downward path, but any future rate cuts will need to be made gradually and carefully.”

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What do the cuts mean for the property market and investors?

The most likely effect is that mortgage costs will continue falling. That includes buy-to-let mortgages, which follow the same interest rates as owner-occupier mortgages.

Previous cuts have led directly to this outcome. There is nothing to say that lenders must reduce their mortgage rates if the interest rate is cut, but the reality of the market means that they will. As soon as one lender does, the rest will follow to avoid losing business.

In the next month, investors are likely to be able to borrow more cheaply at a time when house prices are rising. Rental yields and investment returns will therefore increase from their current level, which is already a 14-year high according to Paragon Bank.

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Will there be further cuts this year?

Nothing is certain, but there are enough indicators for the financial markets to think there may be another cut before the end of 2025.

If the Bank does make another 0.25% cut this year, that would take the base rate to 3.75%, lower than at any time since January 2023.

It would be another boost for the property market as mortgages become even more affordable ahead of 2026. Next year is already predicted to be the start of a four-year run of strong annual house price growth. According to Savills, we can look forward to an average growth of:

4% in 2026
6% in 2027
6% in 2028
5.5% in 2029

The agency’s forecast doesn’t take into account an additional rate cut this year, so the picture may yet improve even further if people gain greater spending power through cheaper mortgages.

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Does the Bank’s rate cut make this a good time to buy UK property?

Today’s rate cut makes now the ideal time to invest in UK buy-to-let property. If there is another cut later this year, then that is even more true. However, even with just what we have seen today, this is the right time to buy.

More house price growth is on the way, and mortgages are about to get cheaper in the coming months. That means if you buy UK investment property now, you can benefit during the purchase and then in the future when you earn higher capital appreciation.

Want to learn more about property investment and where to find the best UK buy-to-let locations? Contact our team of expert consultants today to discover your next investment!