0:02 AM, 2nd August 2024, About 5 months ago
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In good news, the Bank of England has cut interest rates from 5.25% to 5% for the first time in four years.
The property industry is responding positively, as many experts believe this cut will help bring down mortgage rates and provide a much-needed boost to the market.
Ben Thompson, deputy CEO, of Mortgage Advice Bureau, says many experts were split on whether interest rates would be cut.
He said: “This decision could’ve gone either way, but the Bank of England has rolled the dice and now finally has sufficient confidence to cut rates for the first time since 2020.
“For homeowners and those who’ve been looking to get on the property ladder, the past few years have been tough, but there are signs of it already changing. Rates on mortgage deals have been falling, and it’d be feasible that more cuts will follow. For those looking to buy, now is the time to seek advice and get mortgage ready.”
Nathan Emerson, CEO of Propertymark, said: “Today’s rate cut is excellent news for the housing market and no doubt a huge sigh of relief for those who have felt the pain of higher interest rates for the last two years.
“Summer is traditionally a busy time of the year for the housing market, and today’s base rate cut should hopefully provide a new wave of confidence and affordability for many.
“With a new government in power that is committed to delivering nearly two million new homes, Propertymark hopes today’s news is a real turning point for homeowners and those who aspire to buy.”
Sarah Coles, head of personal finance, at Hargreaves Lansdown, says the close vote to cut interest rates shows how divided opinions were.
She said: “The Bank of England was as split as the rest of the market has been over whether a rate cut makes sense this month. In the end, a cut squeaked through for the first time since the onset of the pandemic. The fact the vote was split 5:4 goes to show how tough the decision was.
“The cut is great news for roughly half a million homeowners who have a rate that tracks the Bank of England, with average savings of around £28 a month.
“If you have a fixed-rate deal, it’s going to have less of an impact. Even if you need to remortgage in the near future, this cut isn’t going to spark seismic changes in the market. It was already priced in, so movement will be relatively minimal.
“The market has also priced another cut in 2024, so although we expect rates to be on a downwards trajectory, we’re not expecting anything major.”
Ms Coles added the interest rate cut is positive news for the property market.
She adds: “However, there is good news. Those who have yet to remortgage are likely to be on slightly higher rates than those who have done so since 2022 – and they’re remortgaging onto rates that are down from the peak.
“Those who remortgage in the next six months or so are likely to be moving from a rate of 2%-2.5%, and right now there are deals available for less than 4%.
“The cut will have an impact on the property market quite aside from mortgages. It’s likely to boost sentiment – which is central to the health of the property market. It could persuade more buyers that this is the right kind of market to take a leap of faith and buy.”
Richard Pike, chief sales and marketing officer at Phoebus, said: “The 14 consecutive increases in the Bank’s base rate between December 2021 and August 2023 to its year-long fix at 5.25% have driven up mortgage rates tremendously with a negative impact on the UK property market and the economy.
“That the Monetary Policy Committee has now seen fit to reduce the rate is extremely encouraging for both the property market and the UK’s economic outlook. Market sentiment has been much improved compared to this time last year.
“Things are finally looking up for originators, and we can expect to see lenders reducing existing borrower and new business rates fairly quickly. Expect competitive pricing in the market across all products moving forward.”
Emily Williams, director of research at Savills, says buyers will feel more confident.
She said: “The base rate cut will give buyers increasing confidence that mortgage rates are on course to return to more affordable levels, gradually improving the range of buyers in the market and their buying power.
“We expect this to feed through into more market activity in the autumn, particularly if there are further cuts to the base rates in the coming months.
“Capacity for house price growth will remain limited until there is a more significant reduction in the cost of debt.
“However, this is a clear signal to the market that the Bank feels it has turned a corner in the battle against inflation, and it should give most buyers and sellers confidence that the market will improve as we head into 2025.”
Nick Hale, chief executive officer at Movera, said: “After months of anticipation, the Bank of England’s base rate cut today, albeit small, is to be warmly welcomed. Hopefully, this news should give the market a much-needed shot in the arm as potential housebuyers may now have the confidence to take the plunge.
“The market will no doubt be breathing a huge sigh of relief along with those borrowers on tracker mortgages and standard variable rates.
“The cut comes hot on the heels of the General Election which should usher in a period of increased political certainty. The new government’s ambitious housebuilding plans alone are expected to boost supply in the longer term.”
Tim Bannister, Rightmove’s property expert said: “This year we’ve seen signs that more people have adjusted to higher mortgage rate levels and generally, if they can, have been getting on with moves.
“The property market has been resilient, and even through the uncertainty of the recent election campaign, we saw home-moving activity continue on trend.
“Whilst I wouldn’t expect today’s Base Rate cut to lead to a rush of activity – as mortgage rates are still high and won’t drop significantly in the short term – it is likely to have a positive impact on home-mover sentiment which bodes well for the Autumn selling season.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “In our view, when the interest rate decision has been so close to call it means the impact on the market will be relatively minimal one way or the other.
“Of course, some buyers have been holding off in anticipation of a cut for some time but mortgage rates ‘on the street’ have been softening over recent weeks anyway.
“The approximate 40% of buyers who are not dependent on finance will probably be negotiating just as hard to take advantage of their better bargaining position.
“This reduction in rates to 5% will certainly act as a shot in the arm for activity and buyer affordability over the short term at least, complemented by a strong employment picture.”
Chief executive of Octane Capital, Jonathan Samuels, said: “We’ve seen a far more settled landscape materialise since the base rate was held at the back end of last year and this stability has been key to the slow but steady recovery of the property market in 2024.
“However, today’s somewhat surprising decision to cut rates for the first time since March 2020 is likely to stoke the furnaces with respect to buyer demand levels and accelerate this recovery at a greater pace than expected.
“We’ve already started to see swap rates reduce in recent weeks, which suggest that mortgage rates are soon to follow, but it’s likely that many lenders will now act sooner rather than later which will help ease the cost of borrowing for the nation’s homebuyers.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says the Bank of England will now have to decide whether to cut interest further
He said: “Finally, the Bank of England has made its much-anticipated move and cut interest rates from a 16-year high.
“This will give borrowers an affordability boost, ease pressure on household finances and in doing so, assist the wider economy.
“Even if the new Labour government manages to magic up an additional 300,000 homes this year, there is still a serious affordability issue for first-time buyers. Any base rate reductions will be passed on via lower standard variable rates and to some extent headline rates, which will have a positive impact on borrowing boundaries.
“The next question is when the Bank will reduce rates again, and whether we will see another cut in September or November.”
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