The Bank of England’s first rate cut in four years has sparked an immediate boost in the UK property market, as lower mortgage rates attract more buyers and push up house prices. Data from the property website Rightmove shows a 19% increase in the number of potential buyers contacting estate agents about homes for sale since 1 August, compared to the same period last year. In July, contacts with prospective buyers were up 11% year-on-year.
Rightmove state that the Bank’s reduction in borrowing costs has accelerated the availability of cheaper mortgages from major lenders, which has “significantly” contributed to increased buyer demand. They predict that further rate cuts will create a strong autumn property market.
Financial markets largely anticipate the Bank will respond to easing inflation by cutting rates further, potentially reaching 3.5% by the end of next year. The Bank is expected to maintain current rates at its September meeting before resuming rate reductions in November.
Andrew Bailey, the Bank’s governor, is expected to address central bank policymakers at the annual Jackson Hole conference in the Rocky Mountains on Friday.
As high street lenders lower borrowing costs on new mortgages in anticipation of further rate cuts, Rightmove reports that the average five-year fixed-rate mortgage is now 4.80%—still higher than three years ago before the first of 14 consecutive rate increases, but significantly down from 5.82% at this time in 2023.
Tom Bill, head of UK residential research at Knight Frank, commented, “Markets are expecting another rate cut in 2024, which should result in stronger transaction volumes this autumn compared to last year. However, uncertainty around the budget and the impact of people coming off favorable mortgage deals will likely limit price growth, which we expect to be 3% in the UK this year.”
