In early August, the Bank of England made headlines with its first Base Rate cut in four years, lowering it to 5%. This move has sparked a noticeable boost in the housing market, as evidenced by Rightmove’s data, which monitors shifts in property market activity as they occur.
During July, buyer demand—measured by the number of enquiries about homes for sale on Rightmove—was already up by 11% compared to July 2023. However, since the announcement of the Base Rate reduction, demand has surged even further, now standing at 19% higher than the same period last year. This significant up tick reflects the renewed optimism amongst home-movers, many of whom have been waiting for a more favourable market to make their move.
Tim Bannister from Rightmove, notes: "The first Bank Rate cut since 2020 has provided a much-needed boost to buyer activity as summer draws to a close. Although mortgage rates haven’t yet seen a dramatic drop, the anticipation of further cuts has created a positive atmosphere for home-movers. With the end of the summer holidays, we anticipate a more active autumn market."
Recent Trends in Mortgage Rates
Since the beginning of August, the pace of mortgage rate reductions has picked up, with the lowest available 5-year fixed-rate mortgage (at 3.83% for 60% LTV) being the most competitive since before the mini-Budget in September 2022. However, it’s important to note that mortgage rates are still significantly higher than they were just a few years ago. Further reductions in the Base Rate will likely be necessary before home-movers experience more substantial relief.
House Price Movements This Month
As is typical for this time of year, we’ve observed a seasonal dip in house prices. In August 2024, the average asking price for new properties listed on the market fell by 1.5%, or £5,708, bringing the average price down to £367,785. This decline aligns with the trend of sellers pricing their homes more attractively during the quieter summer months, as many potential buyers temporarily pause their search.
Outlook for House Prices in 2024
At the close of 2023, there was a market prediction of a 1% drop in house prices by the end of 2024. However, given the largely positive developments in inflation and the downward trend in mortgage rates, analysts have modified their forecast. Despite a minor 0.2% increase in inflation last week, this rise was anticipated, and the overall economic outlook remains favourable.
With the recent surge in market activity following the Base Rate cut, the market expects the average asking prices to remain stable for the remainder of the year, with a forecast that house prices will end 2024 approximately 1% higher than they were at the end of 2023.