The UK housing market is anticipated to experience a buoyant autumn, driven by a potential interest rate cut and enhanced political stability, experts suggest.
Lower mortgage rates, resulting from a likely loosening of monetary policy by the Bank of England, could act as a catalyst for buyers to re-enter the property market, according to property search website Rightmove.
Rightmove reported that property market activity remained robust over the last month, despite the general election distraction. 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.
“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,” Rightmove noted.
Despite the resilient activity, the average new seller asking price slipped by 0.4 per cent, or £1,617, over the last month to £373,493. This decline was larger than the typical drop seen in July, as sellers reduced prices to entice buyers who may have held off until the election outcome was clear.
First-time buyers remain cautious, likely due to high interest rates. Rightmove reported a 2 per cent drop in demand from this group over the last month.
Financial markets are hopeful that the Bank of England will lower the base rate for the first time since March 2020 at its August or September meetings. The base rate has increased to 5.25 per cent, a 16-year high, from a low of 0.1 per cent.
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 has decreased to 2 per cent, hitting the Bank of England’s official target for the first time since July 2021, sparking 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.”
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.”
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UK housing market poised for buoyant autumn as interest rate cuts loom