The UK housing market is anticipated to experience a buoyant autumn. This shift is largely driven by potential interest rate cuts and newfound political stability.
As buyers regain confidence, the market could become more active, reflecting increased affordability and a positive outlook.
Lower Mortgage Rates as a Catalyst
Lower mortgage rates, driven by a likely loosening of monetary policy by the Bank of England, could act as a catalyst for buyers. According to property search website Rightmove, market activity remained robust over the last month despite the distractions of the general election.
The number of sales agreed was 15 per cent higher compared to the same period last year, with an additional 3 per cent of new sellers entering the market. Rightmove noted, “This positive sales figure emphasises that serious home-hunters have been largely undeterred by the general election and have been getting on with their moves.”
Slight Decline in Seller Asking Prices
Despite ongoing resilient activity, the average new seller asking price slipped by 0.4 per cent, or £1,617, to £373,493. This decline was larger than the typical drop seen in July.
Sellers reduced prices to entice buyers who may have held off until the election outcome was clear. First-time buyers, however, remain cautious due to high interest rates.
Rightmove reported a 2 per cent drop in demand from this group over the last month. This cautiousness reflects the broader financial uncertainties in the market.
Prospective Rate Cuts and Market Impact
Financial markets are hopeful for a reduction in the base rate by the Bank of England at its August or September meetings.
The base rate, which has surged to 5.25 per cent—a 16-year high—from a low of 0.1 per cent, could see its first cut since March 2020.
A rate cut by the central bank would prompt lenders to reduce mortgage rates, making it more affordable for buyers, especially first-time buyers, to finance house purchases. Rightmove stated that the average rate on a five-year fixed mortgage stood at 4.97 per cent in July, down from a peak of 6.11 per cent in July last year.
Inflation and Speculation Over Rate Cuts
Inflation has decreased to 2 per cent, hitting the Bank of England’s official target for the first time since July 2021. This achievement has sparked speculation over imminent rate cuts.
Tim Bannister, director of property science at Rightmove, commented, “A first base rate cut in over four years, together with new political certainty, could set the scene for a positive autumn market, with improved affordability and a more confident outlook in the second half of the year.”
Government’s Role in Housing Market
The newly elected Labour government has set a target of building 1.5 million new homes. Last week, Chancellor Rachel Reeves announced a series of changes to the planning system, aiming to free up land for more residential development.
UK house prices have surged due to a weak supply colliding with high demand. According to the Office for National Statistics, the average home in England now costs more than eight times the average annual wage, up from 3.5 times in 1997.
Bannister added, “It’s very early days, but the new chancellor’s immediate announcements on housebuilding targets and planning reform are positive signs that the government is keen to get going with its manifesto pledges.”
Historical Context and Future Speculations
Historically, the UK’s housing market has been significantly influenced by changes in monetary policy. The potential rate cuts could restore greater stability and predictability in the housing market.
With the Bank of England’s moves closely watched, any adjustments could have far-reaching consequences not only for housing but also for the broader economy.
Conclusion
In conclusion, the UK housing market appears to be headed for an active autumn, buoyed by potential rate cuts and political stability.
As affordability improves, both buyers and sellers are likely to benefit, making it an opportune time for market engagement.
The anticipated interest rate cuts could provide much-needed relief to the housing market. This could usher in a period of growth and increased activity.
Overall, the combination of political stability and economic measures looks promising for the coming months, offering a hopeful outlook for buyers and sellers alike.
