SEPTEMBER SURGE! BASE RATES CUT SET TO IGNITE THE AUTUMN HOUSING MARKET

Monday August 19, 2024

As we approach September, the housing market is poised for a rejuvenation, with activity expected to ramp up significantly as people return from their summer holidays. This seasonal shift traditionally marks the start of a busier period in the property market, as both buyers and sellers refocus on their moving plans. With the recent reduction in the Bank of England’s Base Rate to 5%, this autumn could see even more pronounced activity as the market begins to adjust to new economic conditions.

Base Rate Cut Sparks Renewed Market Interest

The Bank of England’s decision to lower the Base Rate at the beginning of August has been a welcome development for the housing market, injecting a sense of optimism that had been lacking. This is the first reduction in four years, and it comes at a time when the market has been under pressure from high mortgage rates and economic uncertainty.

The immediate impact of the rate cut has been a marked increase in buyer activity. Demand for properties, measured by the number of enquiries, has surged by 19% compared to the same period last year. This jump builds on an 11% increase in July, indicating that potential buyers who were previously hesitant are now more willing to engage with the market. This renewed interest is a promising sign for the autumn months, traditionally a period of heightened market activity.

Mortgage Rates: Slow to Adjust but Moving in the Right Direction

Despite the positive impact of the Base Rate cut on market sentiment, mortgage rates have yet to see significant reductions. Currently, the average rate for a five-year fixed mortgage stands at around 4.8%, which, although lower than the 5.82% seen a year ago, remains high by historical standards. For many buyers, these rates are still a barrier, and it may take further cuts to the Base Rate before more substantial relief is felt. That said, some reductions are being seen, particularly in certain loan-to-value (LTV) deals, which suggests that a downward trend in mortgage rates could be on the horizon.

Seasonal Adjustments in House Prices

August has traditionally seen a dip in house prices as the market cools during the summer holidays, and this year has been no exception. Average asking prices have dropped by 1.5% from the previous month, a typical seasonal adjustment. However, this decline is not indicative of a weakening market; rather, it reflects the temporary lull in activity as buyers and sellers pause for summer. Year-on-year, asking prices have actually increased slightly, underscoring the underlying stability in the market.

Looking ahead, the outlook for house prices is more positive than previously anticipated. At the start of the year, there were expectations that prices might fall by 1% by the end of 2024. However, with inflation showing signs of moderation and the recent Base Rate cut stimulating buyer activity, there is now an expectation that house prices could rise by 1% by the year’s end. This revision reflects the resilience of the housing market and the growing confidence among buyers.

Economic Context and Future Prospects

While the Base Rate cut has provided a much-needed boost to the housing market, the broader economic environment remains complex. Inflation, particularly in the services sector, continues to pose risks, though overall economic growth has been stronger than expected. As we move into autumn, the housing market is likely to see further adjustments, with both buyers and sellers becoming more active as they adapt to the new economic realities.

In summary, the reduction in the Base Rate has set the stage for a more dynamic and active housing market this autumn. While mortgage rates remain a challenge, the increased buyer activity and stabilising house prices suggest that the market is well-positioned to navigate the months ahead. As always, it’s crucial for buyers and sellers to remain informed and agile, ready to take advantage of the opportunities that this evolving market presents.