The recent interest rate cut by the Bank of England has prompted major high street lenders in the UK to lower borrowing costs for homebuyers. This move has led to a surge in homebuyer activity, with lenders like Barclays, Halifax, HSBC, and NatWest offering five-year fixed rate mortgages below 4%.
Following the Bank of England’s interest rate cut, the best five-year fixed rate mortgage currently stands at 3.83% for buyers with a 40% deposit. This marks the lowest level for such a product since before the UK’s mini-Budget in September 2022. Additionally, tracker rates have also decreased in line with the Bank of England’s rate reduction, further contributing to the affordability of mortgages for homebuyers.
The improving economic environment and the political certainty gained from the UK’s general election have led to a significant increase in buyer activity. According to a report from property portal Rightmove, the number of house hunters contacting estate agents for viewings has surged by 19% compared to a year ago. This spike in buyer activity is a significant improvement from the 11% annual increase recorded in July. Moreover, the number of new sellers coming to the market has also risen by 5% this month.
Tim Bannister, the director of property science at Rightmove, stated that the rate cut has provided some relief to struggling homebuyers. He expects the activity in the housing market to pick up further through the autumn as mortgage rates continue to trend downwards. Although the decrease in mortgage rates may not be substantial at the moment, the prospect of future rate cuts is positive for home-mover sentiment.
Rightmove now projects that new seller asking prices will marginally rise by 1% in 2024, a revision from the earlier prediction of a 1% fall in prices. The Bank of England is scheduled to meet on September 19 to decide on a new interest rate. Market data indicates that there is a 37% chance of a rate cut in September and a 74% expectation for a rate cut in November.
Peter Gettins, a product manager at L&C Mortgages, emphasized that many buyers are closely monitoring the outcome of the upcoming meeting for signals regarding the future trajectory of mortgage rates. The possibility of another base rate cut in the next few months could further boost buyer confidence and strengthen the housing market.
The recent interest rate cut by the Bank of England has had a significant impact on homebuyer activity in the UK. Lower borrowing costs and improved buyer sentiment are driving a surge in the housing market, with expectations of further growth in the coming months. Homebuyers and sellers alike are encouraged by the positive outlook for mortgage rates and the overall economic environment, signaling a promising period ahead for the UK real estate market.