The Bank of England’s first rate cut in four years has sparked a surge in the UK property market, with cheaper mortgages driving up house prices. Since the rate cut on August 1, potential buyers contacting estate agents about homes for sale have increased by 19% compared to a year ago, according to figures from Rightmove.
The rate cut, which reduced the base rate from 5.25% to 5%, has eased pressure on households after borrowing costs were raised to tackle inflation. Rightmove attributes the increase in buyer demand to cheaper mortgages becoming more available from high street lenders.
The Bank’s decision to cut rates is expected to lead to a more active autumn property market, with Rightmove upgrading its house price forecasts from a 1% drop in 2024 to a 1% rise in new seller asking prices. Financial markets anticipate further rate cuts by the Bank, possibly to as low as 3.5% by the end of next year.
The average new seller asking price has fallen slightly this month, but this is typical for the quieter summer months. Increased political certainty following the Labour Party’s general election victory in July, along with a brighter economic outlook, have also contributed to buyer interest in the housing market.
While borrowing costs still remain higher than three years ago, experts predict stronger transaction volumes this autumn with price growth expected to be around 3% in the UK this year. This comes as high street lenders have reduced borrowing costs on new mortgages in anticipation of further rate cuts by the central bank.
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