In the wake of the Bank of England’s first interest rate cut in four years, Britain’s biggest high street lenders have been aggressively reducing their borrowing costs. Lenders such as Barclays, Halifax, HSBC, and NatWest are now offering five-year fixed rate mortgages at rates below the BOE’s current key rate of 5%. This move has led to increased activity among homebuyers, with the best five-year fixed rate currently standing at 3.83% for buyers with a 40% deposit. This is the lowest level seen since before the UK’s mini-Budget in September 2022.
The improved economic outlook, coupled with the political certainty following the UK’s July general election, has created an immediate upturn in buyer activity. According to a report from property portal Rightmove, there has been a 19% increase in the number of house hunters contacting estate agents for viewings compared to a year ago. This surge in activity is a significant jump from the 11% increase recorded in July. Furthermore, there has been a 5% rise in the number of new sellers entering the market this month compared to the previous year. The number of sales being agreed is also up by 16% compared to the same period last year.
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 yet dropped significantly, the anticipation of further rate cuts and declining mortgage rates is boosting sentiment among homebuyers. Bannister expects activity in the housing market to pick up further as we move into the autumn months. Rightmove has revised its earlier prediction of a 1% fall in new seller asking prices to now expect a marginal 1% increase in prices in 2024.
The Bank of England is set to meet on September 19 to make a new interest rate decision. Market data suggests that there is currently a 37% chance of a rate cut in September, with expectations rising to 74% for a rate cut in November. Peter Gettins, a product manager at L&C Mortgages, highlighted that many buyers are closely monitoring the outcome of the meeting for signals on the future trajectory of mortgage rates. The potential for another base rate cut in the coming months could further boost confidence in the housing market.
The Bank of England’s recent interest rate cut has had a significant impact on mortgage rates in the UK, leading to lower borrowing costs for homebuyers. The improved economic conditions and political stability have fueled increased activity in the housing market, with both buyers and sellers showing greater interest. While the full extent of the rate cut’s effects is yet to be seen, the outlook for the housing market seems positive as we head into the latter part of the year.