Bank of England's recent base rate cut boosts market activity
The average price of property coming to market in the UK has dropped by 1.5% to £367,785 this month, equating to a decrease of £5,708, according to latest data from Rightmove.
The decline aligns with the usual seasonal trend observed in August for the past 18 years, as school holidays prompt many buyers to delay home-moving plans. This period typically sees a lull in property prices, with sellers often pricing more competitively due to a pressing need to sell during this quieter period.
However, this year, there is a noticeable increase in buyer interest compared to the same time last year, driven by the Bank of England’s first rate cut in four years, implemented at the start of the month.
In the latest Rightmove House Price Index, Tim Bannister (pictured left), the property listing platform’s director of property science, noted the positive impact of the rate cut on buyer sentiment.
“The first bank rate cut since 2020 has sparked a welcome late summer boost in buyer activity,” Bannister said. “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.”
“There is no doubt the cut in base rate has been a shot in the arm for the housing market, particularly in terms of new enquiries during the traditionally quiet summer period,” added Jeremy Leaf (pictured right), north London estate agent and a former RICS residential chairman. “However, the change was anticipated for such a long time, so it helped soften mortgage pricing on the high street. This meant the impact on property values has been modest to date.”
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Rightmove has revised its 2024 price forecast from an expected 1% decline to a 1% rise in new seller asking prices. It also anticipates small price increases in the autumn, followed by the usual seasonal declines towards the end of the year.
“Of course, Rightmove’s asking prices are not selling prices but do reflect an important trend in seller aspiration and confidence,” Leaf said. “With so many buyers, sellers and others involved in the transaction process now on holiday, obtaining commitment to proceed has been tricky although we certainly expect momentum will return from early September.”
Since the bank rate reduction, the number of potential buyers contacting estate agents to view properties has increased by 19% compared to the same period in 2023. This surge in interest follows a particularly subdued market last year, which was affected by high inflation and peak mortgage rates.
The market continues to show signs of improvement, with the number of sales agreed between buyers and sellers currently tracking 16% ahead of last year, and the number of new sellers coming to market up by 5% compared to this time in 2023.
Mortgage rates are also decreasing, with the average five-year fixed mortgage rate now at 4.80%, down from 5.82% at this time last year. Rightmove’s weekly mortgage tracker indicates that the best available five-year fixed rate is currently 3.83% for those with a 40% deposit, marking the lowest rate since before the mini budget in September 2022.
Bannister expressed optimism about the market’s outlook, despite remaining uncertainties such as October’s budget and the timing of potential future rate cuts. However, he cautioned sellers against overestimating the market’s strength despite the increased buyer activity.
“Although it will likely take a few more cuts to the bank rate for home movers to see a more substantial reduction in mortgage rates, it’s home mover sentiment that has immediately been heightened,” he said. “Though optimism around the direction of mortgage rates is justified, the reality is that they are still very high compared with a few years ago.”
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