In the wake of the Bank of England’s recent interest rate cut, Britain’s major high street lenders, including Barclays, Halifax, HSBC, and NatWest, have been quick to respond by slashing borrowing costs. This move has led to a surge in homebuyer activity, with these lenders now offering five-year fixed rate mortgages of under 4%. This rate is lower than the BOE’s key rate of 5%, marking a significant drop from previous levels.
The improving economic environment and the political certainty gained from the U.K.’s recent 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, indicating growing interest in the housing market.
Furthermore, the number of new sellers coming to the market has risen by 5% this month compared to the previous year. Additionally, the number of sales being agreed is 16% higher than during the near-peak mortgage rate period of a year ago. This surge in new sellers and agreed sales reflects a heightened level of activity in the housing market following the BOE’s interest rate cut.
Tim Bannister, Rightmove’s director of property science, noted that while the rate cut has brought some relief to struggling homebuyers, mortgage rates have not seen substantial declines yet. However, he remains optimistic about the future, expecting activity to pick up further through the autumn as mortgage rates continue to trend downwards. This positive outlook is supported by Rightmove’s revised prediction of a 1% increase in new seller asking prices for 2024, a significant change from its earlier forecast of a 1% fall in prices.
Future Interest Rate Decisions
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 this probability rising to 74% for November according to LSEG data. Peter Gettins, product manager at L&C Mortgages, highlighted that many buyers will be monitoring the outcome of the meeting closely for signals on the future trajectory of mortgage rates. If another base rate cut occurs in the coming months, confidence in the market is expected to strengthen further.
The recent interest rate cut by the Bank of England has had a significant impact on mortgage rates and homebuyer activity in the U.K. High street lenders have responded by reducing borrowing costs, leading to a surge in new sellers and agreed sales. While the full effects of the rate cut are yet to be realized, there is growing optimism in the market, with expectations of further activity and price increases in the near future.