The Bank of England’s decision to lower the base rate to 4.25% is being welcomed by UK property investors, who are likely to benefit from reduced borrowing costs after months of pressure from high interest rates.
Heather Powell, Head of Property at leading audit, tax and business advisory firm Blick Rothenberg, said the rate cut is particularly significant for property investors, who face a range of challenges in the commercial property market.
“The base rate drop is good news for all borrowers, but especially for property investors,” said Powell. “They’ve been managing issues including declining occupancy rates, the rising cost of property improvements, and broader economic pressures affecting tenants.”
The fall in the base rate, which directly influences mortgage and loan rates, will reduce the cost of servicing debt — a major expense for landlords and property developers. Powell said this would help to improve investor cash flow forecasts and free up capital for reinvestment.
“Borrowing costs are a critical part of any property investor’s financial planning. A reduction in interest rates releases funds to invest in property upgrades, including essential improvements to energy efficiency,” she added.
Lower rates could fuel green investment
With government policy and tenant demand increasingly focused on sustainable and energy-efficient buildings, Powell believes the rate cut could enable more landlords to invest in upgrades that would otherwise be cost-prohibitive.
“Energy efficiency improvements are critical to reducing the UK’s carbon emissions,” she said. “But the cost of implementing them is high. Lower borrowing costs give landlords a greater ability to fund these projects — a win for landlords, tenants and the environment.”
The base rate cut is the Bank of England’s fourth reduction since August and follows growing concern over slowing economic growth and disinflationary pressures linked to global trade tensions, particularly President Trump’s tariff regime.
Markets and analysts widely expect further rate cuts throughout 2025, with some investment banks forecasting that rates could fall as low as 3.5% by early next year.
Powell concluded: “We hope that this rate cut is the first of several, which could help stimulate further investment across the property sector.”
With borrowing costs falling and investment conditions improving, UK property investors may be poised for a more optimistic outlook in the second half of 2025.
