In the wake of the Bank of England’s first interest rate cut in four years, Britain’s biggest high street lenders have taken swift action to slash borrowing costs. This move was triggered by a surge in homebuyer activity following the rate cut, with lenders such as Barclays, Halifax, HSBC, and NatWest now offering five-year fixed rate mortgages of under 4%, well below the Bank of England’s key rate of 5%. This represents a significant drop in mortgage rates and marks the lowest level for such products since before the UK’s mini-Budget in September 2022.
The improving economic environment and the political certainty gained from the UK’s July general election have contributed to an immediate upturn in buyer activity, according to a report from property portal Rightmove. The number of house hunters contacting estate agents for viewings has increased by 19% compared to a year ago, showing a marked hike from the 11% annual increase recorded in July. Additionally, the number of new sellers coming to the market has risen by 5% this month compared to the previous year, indicating a boost in overall housing market activity.
Tim Bannister, Rightmove’s director of property science, believes that the rate cut has brought some relief to struggling homebuyers and expects activity to pick up further through the Autumn. While mortgage rates have not seen a substantial decrease since the rate cut, the overall sentiment among home-movers is positive due to the downward trend in rates. Rightmove now anticipates new seller asking prices to rise marginally by 1% in 2024, a revision from its earlier prediction of a 1% fall in prices. This suggests a potential stabilization and even growth in the housing market in the coming months.
Looking ahead, the Bank of England is set to meet on September 19 to make a new interest rate decision. Market expectations currently indicate a 37% chance of a rate cut in September, with probabilities rising to 74% for November, according to LSEG data. Peter Gettins, a product manager at L&C Mortgages, highlights that many buyers are closely monitoring the outcome of the meeting for signals on the future path of mortgage rates. Another base rate cut in the near future could further boost confidence among buyers and lead to increased market activity.
The Bank of England’s interest rate cut has had a significant impact on mortgage rates and buyer activity in the UK housing market. While the full effects of the rate cut are yet to be realized, there is optimism among industry experts regarding the future outlook for mortgage rates and housing market dynamics. As economic conditions continue to evolve, it will be crucial for both lenders and buyers to closely monitor market developments and adapt their strategies accordingly.