The recent interest rate cut by the Bank of England, the first in four years, has led to a swift revival in the UK property market. This reduction has made mortgages more affordable, prompting increased interest from buyers and driving up house prices. According to Rightmove, there has been a 19% surge in potential buyers contacting estate agents since the rate cut on August 1, compared to the same period last year, with a similar uptick in July.
The Bank of England’s decision to lower the base rate from 5.25% to 5% was influenced by a decline in inflation, which fell to 2.2% in July, still slightly above the Bank’s target but significantly lower than the peak of 11.1% two years ago. This reduction has eased the financial strain on households after a series of rate hikes aimed at combating rising inflation.
The rate cut has also accelerated the availability of cheaper mortgages from high street lenders, which has “significantly” boosted buyer demand. As a result, Rightmove has revised its forecast for house prices in 2024, now predicting a 1% rise in new seller asking prices, instead of the previously anticipated 1% drop.
Looking ahead, financial markets expect the Bank of England to further reduce interest rates, potentially down to 3.5% by the end of next year. However, borrowing costs remain higher than they were three years ago, and housing affordability continues to be a challenge for many.
Overall, while the immediate impact of the rate cut has been positive, with increased activity and interest in the property market, the future will depend on further economic developments and potential rate adjustments.
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