Britain's property market is experiencing a surge in activity following the Bank of England's first interest rate cut in four years, which has prompted major high street lenders to slash borrowing costs. This move has led to a boom in homebuyer interest, with lenders like Barclays, Halifax, HSBC, and NatWest now offering five-year fixed-rate mortgages below 4%, significantly under the Bank of England’s 5% key rate.
According to a recent report from property portal Rightmove, the best five-year fixed rate available is currently 3.83% for buyers with a 40% deposit. This is the lowest rate seen for such a mortgage product since before the UK’s mini-budget crisis in September 2022, which had previously caused a sharp increase in borrowing costs.
This rate reduction follows the Bank of England’s decision earlier this month to lower its base rate by 25 basis points, which also led to an easing of tracker mortgage rates. The combination of an improving economic environment and the political stability brought by the UK’s July general election has contributed to an "immediate upturn" in buyer activity, according to Rightmove.
The property portal’s report revealed a 19% increase in the number of potential buyers contacting estate agents for viewings compared to the same time last year. This marks a significant rise from the 11% annual increase recorded in July. Additionally, the number of new sellers entering the market has risen by 5% year-over-year, while the number of sales agreed is 16% higher than during the period of near-peak mortgage rates a year ago.
Tim Bannister, Rightmove’s director of property science, noted that while the rate cut was minimal, it provided some relief to struggling homebuyers and is expected to further boost market activity throughout the autumn. "The fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment," Bannister stated in the report.
As a result of these developments, Rightmove has revised its forecast for the housing market, now predicting that new seller asking prices will rise by 1% in 2024, an upward adjustment from its earlier forecast of a 1% decline. Looking ahead, the Bank of England is scheduled to meet on September 19 to decide on a new interest rate adjustment. Current market data from LSEG indicates a 37% chance of a rate cut in September, with expectations increasing to 74% for November. Peter Gettins, product manager at L&C Mortgages, commented that many buyers will be watching the upcoming BOE meeting closely for clues on future mortgage rate trends.