(Commonwealth) _ The UK property market has experienced an immediate resurgence following the first interest rate cut by the Bank of England in four years. The rate reduction has fueled increased buyer activity, as cheaper mortgages become more accessible, prompting a notable rise in inquiries to estate agents and an uptick in house prices.
According to figures from the property website Rightmove, the number of potential buyers contacting estate agents about homes for sale jumped by 19% since 1 August 2024 compared to the same period the previous year. This marks a significant increase, especially considering that contacts in July had already risen by 11% year-on-year. The Bank of England’s decision to cut interest rates on 1 August was a crucial factor in this shift.
The rate cut marked the first decrease since the start of the COVID-19 pandemic. Prior to this, the Bank had been steadily raising rates in an effort to combat soaring inflation, resulting in borrowing costs reaching their highest levels since the 2008 financial crisis. The August rate cut reduced the Bank’s key base rate from 5.25% to 5%, a move made possible by the recent fall in inflation to more manageable levels.
Inflation, which peaked at 11.1% two years ago due to the energy price surge triggered by Russia’s invasion of Ukraine, has since eased. Figures from July 2024 show inflation at 2.2%, slightly above the Bank’s target of 2% but still significantly lower than the peak levels seen in the aftermath of the war. This decline in inflation has relieved some of the pressure on households and allowed the Bank of England to lower interest rates in an attempt to stimulate the economy.
Rightmove reported that the Bank’s decision to cut borrowing costs has not only made mortgages more affordable but has also accelerated the availability of cheaper loans from high street lenders. This development has significantly boosted demand from prospective buyers. The combination of cheaper mortgages and growing confidence in the market has set the stage for a potential revival in the property market heading into autumn.
Looking ahead, Rightmove predicted that further rate cuts could contribute to a buoyant property market in the coming months. The company has revised its house price forecast for 2024, moving from an expected 1% decline to a 1% increase in new seller asking prices. Rightmove’s optimistic outlook reflects the growing belief that additional interest rate reductions will continue to drive buyer demand.
Financial markets are anticipating that the Bank of England will continue to lower rates as inflationary pressures fade. Projections suggest that rates could drop to as low as 3.5% by the end of 2025. However, before this happens, the Bank is expected to keep rates on hold at its September meeting, with the possibility of restarting rate cuts in November.
Andrew Bailey, the governor of the Bank of England, is scheduled to speak at the annual Jackson Hole symposium in the US Rocky Mountains on Friday, where central bank policymakers will gather to discuss global economic trends. Bailey’s remarks will likely provide insight into the Bank’s plans regarding interest rates.
In the meantime, Rightmove reported that the average asking price for new sellers has decreased by 1.5%, or £5,708, in August, bringing the average price to £367,785. This decline is typical for August, which is generally quieter for the property market due to the summer holiday season. The price drop aligns with the long-term average for the past 18 years, indicating that the market is following its usual seasonal patterns.
