The Bank of England has cut interest rates, sparking growth in the housing market as potential buyers are able to gain cheaper mortgages.
Estate Agents Take Advantage
As the Bank of England’s base interest rate is cut, 19% of estate agents have reportedly seen an increase in business.
Bank of England Cuts Rates
The BofE has reduced rates by .25%, which can see savings of hundreds of pounds per year for many borrowers.
Interest Rate Slashed
The interest rate went from 5.25% to 5%. This indicates a downwards trend as inflation is more under control and the cost of living crisis is largely behind us.
End of Summer Boom
The cut in interest rates sparked a marked increase in sales and purchases as buyers save money on mortgages. Appetite and ability to buy property is returning.
Welcomed by the Industry Members as Positive
Tim Banner from RightMove said the interest rate reduction “sparked a welcome late summer boost in buyer activity” Which can be a time of slower growth in the property markets.
Not Substantial, but a Start
Banner added: “While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment.”
Autumn Has the Right Conditions to Grow
Banner concluded by saying, “as the summer holiday season comes to an end, the conditions are there for a more active autumn market.” People will tend to have more time to focus on their selling and buying plans.
Truss’ Legacy
Interest rate increases linked to the era of former Prime Minister Liz Truss lead to chaos in financial markets, due to unsustainable levels of uncertainty introduced.
Enquiries on the Rise
Enquiries to estate agents on the rise by 11% in August, showing a marked increase in the public’s demand for property.
Fixed Rates Now Significantly Lower
Some 5 year fixed rate mortgages have now dropped to 4.8%, from around 5.82% when the Bank of England’s base rate was 5.25%.
Asking Prices Drop by Thousands
Research has shown that average asking prices fell by £5,708 between 7th July and 10th August, resulting in lower positive capital for sellers. This indicates it’s more of a buyers market.
Drop in Prices and Holidays
Seasonally the summer is typically when a lot of the population go on holiday and delay any purchase or sale of a property. Rightmove states this pattern has happened for the past 18 years.
House Prices in 2023
Research by market leading experts finds house prices were 0.8% higher than a year ago with last month seeing a 0.4% increase. This shows that even though prices have fallen, they are still slightly higher than a year ago.
Housing Market Needs Boost
Nathan Emerson, CEO of Propertymark adds, “What the housing market urgently needs is a confidence boost following three years in 2020-23 of economic disruption.”
Further Interest Rate Cuts
Emerson adds, “If inflation continues to fall next month, it would be positive for the Bank of England to use this as an opportunity to cut interest rates further, especially as the recent cut in interest rates spurred some activity in the housing market.”
House Prices Predicted to Rise
Forecasts from a market leading report show house prices will rise by 1% in the coming months.
Previous Predictions Outperformed
Previously the property website suggested prices would fall by 1%, which we aren’t currently seeing. This is good news for sellers, not so much for buyers.
Another Cut on the Horizon
Financial markets predict a 31% chance in base rate cuts during September, which could boost the property market even further.
Final Quarter Cut
The markets are 82% confident of a cut to the rate in November, which would likely boost consumer spending across the board, as well as improve property sales.
Late Year Cuts Due to Inflation
Inflation rose to 2.2% in July, the first increase in 6 months. This increase will make houses less affordable and harder for first time buyers to get on the housing ladder thanks to more stress on household budgets.
Future Prospects
We currently have a housing crisis in the UK, and many first time buyers are struggling to get onto the property market. Hopefully a calming in prices, and an increase in house building will help to solve the problem.
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