The Bank of England has announced a 0.25% cut to the base interest rate, bringing it down to 4.5%. This decision follows a decline in UK inflation to 2.5% in December, marking the first drop in three months. But what does this mean for homeowners, property investors, and those managing short-term rental properties like Airbnbs in Falmouth?
Why has the interest rate been reduced?
Since late 2021, the Bank of England has been increasing interest rates to curb rising inflation, which peaked at 11.1% in October 2022. The base rate was raised from 0.1% in 2021 to a high of 5.25% in August 2023. However, with inflation showing signs of cooling, the Bank has opted to gradually lower rates to support economic growth.
Andrew Bailey, the Bank’s governor, noted in December that future rate reductions would be gradual, as economic uncertainties remain. However, this latest cut signals a positive shift that could benefit property owners and investors in Falmouth.
How does this impact mortgage rates?
For those with variable or tracker mortgages, this rate cut should bring a reduction in monthly payments almost immediately. Fixed-rate mortgage holders whose deals are nearing expiration will likely see more competitive new offers, as lenders factor in the lower base rate.
Property market experts suggest that this is great news for buyers and investors. Mortgage rates have already started to drop, with the average five-year fixed-rate mortgage at 4.4% and two-year deals at 4.6%. Major lenders like Barclays, Santander, and Yorkshire Building Society have already responded by lowering their rates.
What this means for Falmouth’s property and Airbnb market
At Guested, we’ve been closely monitoring market trends that impact short-term rental properties. This rate cut could have several effects on Airbnb hosts and property owners in Falmouth:
Increased buyer confidence: Lower mortgage rates make property purchases more attractive, potentially leading to more investment in short-term rental properties.
Higher rental demand: As borrowing costs ease, more people may opt to buy second homes for Airbnb use, increasing supply but also attracting more visitors due to improved affordability.
Better refinancing options: Existing hosts with mortgages might find better refinancing deals, helping to reduce costs and increase profitability on short-term lets.
Positive long-term growth: With stability in borrowing costs, the property market is seeing renewed interest. More buyers and sellers are re-entering the market, with homebuyer demand currently 9% higher than last year and agreed sales up by 11%.
Looking ahead: a stronger market for Airbnb hosts
The housing market is expected to see around 5% more sales this year, with average house prices projected to rise by 2.5%. This bodes well for property owners looking to enter or expand their footprint in Falmouth’s lucrative short-term rental sector.
If you're considering investing in a new Airbnb property or refinancing your existing mortgage, now could be a great time to explore your options. At Guested, we specialise in managing high-quality short-term rentals, ensuring property owners maximise their returns while providing exceptional guest experiences.