The Bank of England Cuts Base Rate: What It Means for the Chelmsford Property Market

The Monetary Policy Committee (MPC) has today reduced the Bank of England base interest rate by 25 basis points, bringing it down from 4.5% to 4.25% (BBC).

It isn’t a surprise.

Two MPC doves even voted to go further, with a 0.5% reduction, which is also quite interesting.

It is a move designed to stimulate a national economy that has been dampened amidst global tensions around trade, in light of Trump’s tariffs – the effect of which I have written about recently (see article here) – leading to reduced forecasts for domestic growth.

A Timely Boost for a Cooling Property Market

In property market terms – nationally, in fact, but including the Chelmsford property market – today’s rate-cutcomes at a useful time, particularly in light of reports from the Royal Institute of Chartered Surveyors (RICS)this week about a recent cooling-off of property sales activity.

Data from the RICS indicates a slowdown in the UK housing market in general, with buyer demand declining significantly in April – presenting a net balance of -37% in their report this morning. And that reduced demand has led to a reduction in agreed sales.

The RICS attributes the recent slowdown to the end of the stamp duty holiday in particular, but I have no doubt that the property market, inline with the British economy in general, has also been impacted by rising costs of living, as well as doubts and concerns that have seeped into our collective psyche from global news events, and not least of course from increased mortgage rates.

Mortgage rates are not historically high, as agents who have been in the game as long as we have know only too well (this is not our first rodeo), but nevertheless they are higher than a number of homeowners had become accustomed to for a long period of time, from the crash of 2008 until around 2022.

This is why those coming off the three or five year fixed rate mortgages they took out in 2020 or 2022 are looking nervously at mortgage rates right now.

For those people, today’s base interest rate news should come as a relief.

The Property Market in Chelmsford

Here in Chelmsford, we have observed similar trends. The market has experienced a lull, with fewer buyers entering the fray since the end of March.

My personal view is that I do expect this base rate cut today to serve as a catalyst that should reinvigorate interest amongst some buyers – but I also suspect it is not the last base rate cut we will see this year.

Many economists, analysts and large banking institutions had forecast three or even four more cuts this year. The chances of reaching a 3.75% Bank of England base rate by the end of the year I would consider to be quite likely; some are predicting 3.5%.

This is why some borrowers are opting to take Tracker Rate mortgages as opposed to fixing for two, three or five years.

Impact on Mortgage Rates and Affordability

A lower base rate often leads to reduced mortgage rates, making borrowing more affordable for potential homeowners. However, we have already seen mortgage lenders competing for business by reducing product rates recently, with a number of mortgage options now available at below a 4% rate.

Today’s cut should give those and other lenders confidence to hold the rates they have set recently, and might encourage some to go further. My ten pence says that, whilst I expect to see a few more headlines about lower mortgage rates, the actual cuts to mortgage rates we will really see from where they currently are will be fairly modest in the short term.

With perhaps a few more rates dipping below 4% to join those that have already, and with those rates likely to hold for the time being, we should see a benefit to first-time buyers and those looking to upsize, as monthly repayments become more manageable – something that will be perceived as a bonus by those buyers who missed out on the recently ended stamp duty break.

In Chelmsford, property values have remained reasonably stable over the last 12 months, inching up by around 1.7% according to the latest ONS data available.

Improved affordability might attract a new wave of buyers, eager to capitalise on favourable lending conditions and buy into what is generally speaking considered to be a solid, safe and relatively affordable marketplace, considering the local facilities and economic landscape in Essex, our proximity to London, and the ease of reaching London from here quickly, by road and rail.

The Investor Market

One implication to consider when base rates reduce, is the effect this has on savers.

Bank interest on savings also reduces – and when the return that money can get in the bank drops back significantly enough, eyes return to bricks and mortar as an investment vehicle. Despite any concerns people might have about being a landlord, with the tax implications that come with it, extra stamp duty levies suffered and of course the forthcoming legislation changes we expect within weeks, not months, property as a rental investment starts to look quite an attractive option compared to leaving money sitting in a savings account.

And when we often see rental yields in some parts of Chelmsford breaking 5% – or even 7 or 8% for HMO properties, in some cases – it is no surprise that here at CDC we expect more enquiries from landlords looking to invest money into higher-return investments, as interest rates fall.

Seasonal Considerations

With summer approaching, the housing market typically experiences a slowdown due to major sporting events and then the summer holiday season (more usually through July and August).

That normally brings an end to the more frantic and feverish Spring market – but as mentioned, the residential sales market is currently underperforming so far through the second quarter of this year, following that stamp duty holiday coming to an end on March 31.

Today’s base rate cut could counter this trend, encouraging buyers to act again in a way that more closely resembles a buoyant Spring-time market – perhaps correcting the pattern currently taking shape.

Looking Ahead

For Chelmsford property owners and house hunters, the base rate cut today is a positive development, but – as I often seem to say – it is essential to approach the market with informed optimism.

Economic factors, including global trade dynamics, continue to influence the broader financial landscape.

For those considering buying or selling in Essex, now might be an opportune moment to engage with the market. At Charles David Casson, we’re here to provide guidance and support tailored to your needs.

That guidance really can come long before you start viewing properties or before you have any thoughts of selling – there is no pressure, and frankly we consider it a part of the job.

At the very least it might be worth speaking to a qualified mortgage broker or financial advisor in light of the change to the base rate today – and I can certainly point you in the direction of somebody if you would like some professional advice.