Rate Cut Sparks UK Housing Market Growth

The UK housing market seems to be turning a corner, with fresh data from Rightmove’s latest house price index signaling some positive developments. August, often a quiet month, is now being tipped as a “pivotal” moment for the market this year.

For the 18th year in a row, new seller asking prices have seen a slight dip in August. This small drop is actually in line with what’s been the norm over nearly two decades, bringing the average asking price to £367,785.

But here’s where it gets interesting. The Bank of England’s recent move to trim the base rate from 5.25% to 5% has already sparked a noticeable uptick in buyer activity. People are eager to get moving on their property transactions, and the numbers back this up. There’s been a 19% increase in prospective buyers contacting estate agents for viewings compared to this time last year. July, in particular, saw a significant surge in interest, likely in anticipation of the rate cut.

Even with the usual seasonal slowdown, Rightmove has revised its forecast for the year. Instead of predicting a -1% drop in house prices, they now expect a 1% increase by year-end. Of course, this won’t be the case everywhere; the north of England, in particular, is expected to outperform the national average.

The positive vibes don’t stop there. Rightmove’s analysis also shows that sales agreed across the UK are up 16% from last year, when mortgage rates were much higher. There’s also been a 5% increase in new sellers entering the market, and they’re likely to benefit from what’s being dubbed a “buyer buzz” fueled by improving economic conditions and better mortgage rates.

Speaking of mortgages, the market has seen significant improvement. The average five-year fixed rate is now 4.80%, down from 5.82% last year, and if you’ve got a 40% deposit, you can snag a rate as low as 3.83%.

Looking ahead, there are some unknowns on the horizon, like the upcoming Autumn Budget under the new Labour government and potential further interest rate cuts. However, the overall sentiment is positive. Rightmove’s Tim Bannister is optimistic, stating that “the scene is now set for a positive remainder of the year,” thanks to more competitive mortgage rates and a general sense of confidence among buyers and sellers.

Regionally, the North East, Yorkshire and the Humber, and the North West are leading the charge with annual house price increases of 3.6%, 3.5%, and 3% respectively, well ahead of the UK average. These areas are expected to continue performing strongly.

Knight Frank, another big player in the market, is even more bullish about the future. They’re predicting a 3% overall price growth by the end of the year, with some regions likely to exceed this figure.

Tom Bill, head of UK residential research at Knight Frank, pointed out that while August is usually a quiet month for the housing market, this year it could be a game-changer thanks to the rate cut and better-than-expected inflation numbers. He does caution, however, that uncertainties around the Budget and people coming off favourable mortgage deals might keep a lid on price growth, which he also predicts will be around 3% for the year.

All in all, it looks like the UK housing market is in for an interesting ride as we head towards the end of 2024.

Adapted from BuyAssiciation