LONDON — In response to the Bank of England’s recent decision to lower interest rates for the first time in four years, the UK’s major banks have cut mortgage rates, significantly reviving the housing market.
Lenders such as Barclays, Halifax, HSBC and NatWest are now offering five-year fixed-rate mortgages at rates below 4%, which is below the BOE’s 5% prime rate. The most competitive of these offers is a five-year fixed rate of 3.83% for homebuyers who can put down a 40% deposit, the latest Rightmove report revealed. This rate is the lowest since the economic fallout from the UK’s mini-budget in September 2022.
This reduction is in line with the Bank of England’s adjustment earlier this month, which saw a 25 basis point reduction.
According to Rightmove analysis, favourable economic signals and political stability following the UK general election in July have triggered a significant increase in activity in the housing market.
There has been a 19% increase in potential buyers using real estate agents to arrange viewings since the Bank’s August 1 decision, a significant jump from the 11% year-on-year increase seen in July. In addition, the influx of new sellers into the market this month is up 5% from a year ago, with the number of completed sales up 16% from a year earlier, when mortgage rates were near their peak.
Tim Bannister, director of real estate at Rightmove, said the modest fall in rates had provided significant relief to homebuyers and he expected a further surge in market activity this autumn.
He added: “Although the decline in mortgage rates since the rate cut has not been substantial, the start of the rate-cutting cycle and the downward trend in mortgage rates are bolstering buyer confidence.”
Rightmove has updated its forecast for 2024, now expecting a slight 1% increase in asking prices from new sellers, revising its previous forecast of a 1% fall.
With the Bank of England’s next meeting scheduled for September 19 to decide on interest rates, market analysts are speculating. Current data suggests a 37% chance of a rate cut in September, with expectations rising to 74% for November.
Peter Gettins, product manager at L&C Mortgages, noted that many prospective buyers are watching the upcoming meeting closely to gauge the future direction of mortgage rates. He said, “A further reduction in the base rate in the near future could further shore up buyer confidence.”
The housing market’s response to these changes will be closely monitored as further developments unfold.
