‘Buyer buzz’: Outlook raised for UK house prices after interest rates cut

Property portal Rightmove has said there is a “degree of buyer buzz” in the housing market, caused by the moderation in mortgages in light of the Bank of England’s decision to cut the base interest rate.

It raised its house price forecast for 2024 from negative one percent to one per cent, citing more interest from both sellers and buyers.

The housing market has been on a slow upward trajectory since February, as buyers and sellers began to price in a rate cut.

The Bank of England finally cut the interest rate on August 1, from 5.25 per cent to five per cent, by a thin majority of 5-4.

The number of potential buyers who contacted estate agents about homes for sale jumped by 19 per cent year on year in August, Rightmove said.

The average asking price of a home fell by 1.5 per cent month on month – by £5,798 to £367,785 – but Rightmove cautioned that it would be unwise to focus on the monthly figure as house prices have declined month on month in August every year for the past 18 years.

“The distractions of school summer holidays traditionally bring a dip in prices, as some buyers put their home-moving plans on hold to enjoy holidays or time with family,” the property portal said.

Matt Thompson, head of sales at Chestertons, said: “Despite the summer holidays, we are currently seeing more house hunters starting or resuming their search than we did in August of last year.

This increase in buyer activity is predominantly driven by lower interest rates and the availability of more attractive mortgage products which is even tempting first-time buyers to take the first step towards home ownership.”

A moderation in mortgages

The key change in the housing market has been the moderation in mortgages. While there are some concerns about tax rises in the October budget, the positive sentiment created by the cut seems to have made more of an impact on the market.

Rightmove said that the average five-year fixed mortgage rate was 4.80 per cent in August, an improvement from 5.82 per cent a year ago. The best available five-year fixed rate was 3.83 per cent for those with a 40 per cent deposit, it said, the lowest a 5-year fixed rate has been since the period before the mini-Budget in September 2022.

Tomer Aboody, director of specialist lender MT Finance, said: “Now that we’ve had the first interest rate cut in a few years, mortgages have followed suit, which has already led to more activity in the market.

There has been an uptick in the number of buyers and sellers registering interest, keen to take advantage of lower mortgage rates.

This, along with lower inflation numbers, has provided a positive outlook and feel-good factor for the market, bolstered by the hope of further rate reductions to come.”

Gary Hamilton, founder of Bohome Estate Agents in Hamilton, added: “With schools returning and routines normalising, we expect activity to pick up further in the coming weeks.

The stability we’ve observed in July positions us well for continued growth into the Autumn.”