What’s going on here?
The Bank of England cut interest rates from a 16-year high on August 1, causing a buzz in the UK’s housing market.
What does this mean?
The BoE’s decision to lower interest rates has ignited buyer activity in the UK housing market. Rightmove reported a 19% rise in buyer inquiries this August compared to last year. This resurgence is partly due to the average interest rate on a five-year fixed-rate mortgage dropping to 4.80% from 5.82% a year ago. Financial markets now anticipate at least one or two more quarter-point cuts by the end of 2024. Interestingly, the average asking price for newly advertised properties decreased by 1.5% between July 7 and August 10, although it’s still 0.8% higher year-on-year. Official data shows property prices in June were up 2.7% from the previous year, one of the largest increases since March 2023.
Why should I care?
For markets: A positive ripple effect.
The BoE’s rate cut has positively impacted the mortgage market, with rates falling in anticipation of the decision. This has led to increased confidence among home movers, boosting overall sentiment. Tim Bannister, a director at Rightmove, mentioned that the long-awaited rate cut is a breath of fresh air for those looking to buy or move homes in the current economic climate.
The bigger picture: A cautious approach forward.
BoE Governor Andrew Bailey warned against cutting rates too quickly despite recent positive trends in the housing market. The BoE’s approach is being watched closely by markets, expecting gradual reductions to avoid potential economic overheating. This cautious optimism aligns with improved buyer sentiment, suggesting a period of stabilized growth for the UK’s property market.