In August 2025, the Bank of England cut the base rate of interest from 4.25% to 4%, the lowest it had been since March 2023, followed by a further cut in December 2025 to 3.75%. This impacted finances including mortgages and savings accounts, as well as global investors.
When setting the base rate, the Bank of England’s overarching aim is to keep inflation stable and low, and at the target set by the government, which is currently 2%. When the Bank raises rates, this tends to reduce spending, while when it lowers rates, this tends to increase spending. The Bank may cut interest rates if people start spending too little to help support a rise in spending.
A Drop in Mortgage Rates
Mortgage lenders adjust their rates in line with the base rate benchmark, as set by the Bank of England. A cut in this base rate typically results in a drop in mortgage rates, great news for property investors who will usually enjoy lower repayments. Plus, the market becomes more competitive when rates are dropped, with lenders scrabbling to change their offerings to remain attractive to property buyers. Experienced portfolio managers such as Emile Salame understand that, in summary, a falling base rate of interest creates a generally favourable environment for UK property buyers and investors. For more information about the base rate, take a look at the embedded PDF.
An Attractive Rental Market
For many property investors, now is a good time to invest, with demand for rental properties in cities including Manchester and Birmingham increasing rapidly and supply currently unable to meet demand. Rental growth in Manchester has grown by nearly 46% over the last five years, while Birmingham has recently been identified as having the greatest imbalance of supply and demand in the UK, according to the property investment firm Select Property.
Added to this, luxury apartments in both Manchester and Birmingham often offer higher rental yields compared to those in London and can typically be secured with significantly less capital.
Overseas Investors
As of April 2025, the British pound sterling was stronger than it has been in recent years but lower than historical averages. This has created a potential window of opportunity for overseas investors holding capital in other currencies. These investors may be able to buy property at a ‘discount’ due to a favourable exchange rate. As property is typically an asset held for at least several years, overseas investors could enjoy higher returns when the pound eventually returns to a higher average rate.
