In the aftermath of the Bank of England’s first interest rate cut in four years, Britain’s major high street lenders have been actively reducing their borrowing costs. The likes of Barclays, Halifax, HSBC, and NatWest are now offering attractive five-year fixed rate mortgages at rates of under 4%, which is below the BOE’s key rate of 5%. According to a recent report from property portal Rightmove, the best five-year fixed rate currently stands at 3.83% for buyers with a 40% deposit. This drop in mortgage rates is significant, considering that it is the lowest level seen since before the U.K.’s mini-Budget in September 2022.
The reduction in borrowing costs has ignited a surge in homebuyer activity across the country. The improving economic outlook, coupled with the political stability following the July general election, has resulted in an immediate upturn in buyer sentiment. Rightmove’s report indicates a 19% increase in the number of house hunters contacting estate agents for viewings compared to the previous year. This boost in activity is a considerable jump from the 11% annual rise recorded in July. Moreover, the number of new sellers entering the market has also seen a 5% increase year-on-year.
Positive Outlook for the Housing Market
Tim Bannister, the director of property science at Rightmove, believes that the rate cut has provided some relief to struggling homebuyers. While mortgage rates have not seen a substantial decrease post the rate cut, the anticipation of further cuts in the future has positively impacted home-mover sentiment. Bannister predicts a further uptick in activity as we move into the autumn months. Rightmove has revised its initial forecast and now expects new seller asking prices to rise marginally by 1% in 2024, in contrast to the earlier prediction of a 1% fall in prices.
The Bank of England is scheduled to convene on September 19 for another interest rate decision. Market data shows that there is a 37% probability of a rate cut in September, with expectations rising to 74% for a cut in November. Peter Gettins, a product manager at L&C Mortgages, highlighted that many buyers are closely monitoring the outcome of this meeting for indications of the future trajectory of mortgage rates. A potential base rate cut in the coming months could further bolster confidence in the housing market.
The recent Bank of England interest rate cut has had a significant impact on mortgage rates in the UK. The subsequent decrease in borrowing costs has stimulated buyer activity and provided some relief to the housing market. While the full effects of these rate cuts are yet to materialize, there is cautious optimism regarding the future prospects of the housing sector. As market dynamics continue to evolve, both buyers and sellers are advised to remain vigilant and adapt to the changing landscape of mortgage rates and property prices.