12:22 PM, 7th November 2024, About a month ago 3
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The Bank of England’s Monetary Policy Committee (MPC) Hawks won out today voting by 8 – 1 to reduce the Bank Base rate by 0.25% from 5% to 4.75%.
This was despite a recent Labour Budget widely perceived as inflationary as the Bank of England projects the measures announced by Chancellor Rachel Reeves to add 0.5% to the inflation figures.
CPI inflation is currently 1.7% but is projected to increase to around 2.5% as weaker fuel prices wind out of the figures. However, service price inflation is still relatively high at 4.9% causing domestic inflationary pressure to resolve more slowly, especially with a tight labour market.
No account for any potential future inflationary Tariff trade barriers by the incoming Trump administration seems to have been taken into consideration.
The MPC summary stated: ” The combined effects of the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP by around ¾% at their peak in a year’s time, relative to the August projections. The Budget is provisionally expected to boost CPI inflation by just under ½ of a percentage point at the peak, reflecting both the indirect effects of the smaller margin of excess supply and direct impacts from the Budget measures.
“There remains significant uncertainty around the outlook for the labour market. Data are difficult to interpret and wage growth has been more elevated than usual relationships would predict. The impact of the Budget announcements on inflation will depend on the degree to and speed with which these higher costs pass through into prices, profit margins, wages and employment.”
“The balance of risks to global activity, particularly stemming from China and Germany, remained to the downside in the near term. Alongside that, there were upside risks to goods and commodity prices from greater trade fragmentation and adverse geopolitical developments, including from events in the Middle East.”
Ben Thompson, deputy CEO, of Mortgage Advice Bureau, said: “Another rate cut is starting to move the dial back again in the borrower’s favour, following an eventful week or so since the budget.
“With the Bank of England opting for another steady .25 cut, we could see swap rates and, consequently, mortgage rates fall, subject to markets settling further following the budget and the outcome of the US election also.
“Our data shows that falling rates have already impacted borrower preference. Last month, over half (54%) of borrowers opted for a five-year fixed rate, an increase of 11% versus the same period last year, clearly showing a change in customer mindset.
“It will be interesting to look again at this after the dust has settled following the budget and the outcome of the US election, and their combined impact on mortgage pricing.”
Nathan Emerson, CEO of Propertymark, said: “Today’s announcement will be welcome news for buyers, especially for those who may have been delaying any house move due to potential uncertainty on their overall affordability.
“With the Bank of England’s most recent Money and Credit Report revealing net mortgage lending has further increased by 0.9 per cent in September, up on the 0.7 per cent seen in August, coupled with proposed changes to Stamp Duty thresholds from next April, it’s highly likely we may see buoyant activity in the market across the winter months.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “This is hugely positive for borrowers, with the Bank of England doing the right thing given inflation is below the 2 per cent target. Those on base-rate trackers and variable-rate mortgages should see their monthly payments fall, and those savings will be gratefully welcomed by hard-pressed borrowers.
“While we are seeing a slight increase in mortgage rates, existing borrowers should engage with a whole-of-market mortgage broker approximately six or seven months prior to the current deal ending to lock into a new deal. Should mortgages rates rise further, you will be assured that something has been reserved but if rates fall, you can ask your adviser to reivew what is available nearer the time.”
Mr Harris adds: “New borrowers and first-time buyers should speak to a broker to run through the various schemes available to help them climb onto the property ladder, as well as how to make themselves as attractive as possible to prospective lenders.
“We expect the MPC to continue on the anticipated path for base rate with further reductions in coming months, bringing further relief for homeowners and home ownership within the grasp of first-time buyers. However, what cannot be guaranteed is where rates end up, nor the pace it takes to get there. If you cannot afford to be wrong – that is, if rates were to rise you would struggle to pay the mortgage – then a fixed-rate mortgage usually makes sense.”
Chief Commercial Officer of Molo, Mark Michaelides, said: “As expected, the Bank of England has announced a 25bps reduction in the base rate to 4.75%. This is clearly a positive signal for the UK property market, amidst what has been a volatile couple of weeks in the markets.
“The swap market is still searching for a stable level following the UK Budget, US Election results, and rate decisions on both sides of the Atlantic (with the Fed decision to be announced later today). While the expectation is that the new US administration’s economic policies may be inflationary, the read-across to the UK is not clear-cut.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said: “It’s a significant week for the property market with the Budget, the US election, and now the Bank of England’s interest rate decision.
“The August rate reduction boosted buyer confidence, leading to an uptick in applicant registrations, viewings, and offers, contributing positively to our fourth quarter revenue. A further rate drop would likely encourage more vendors to sell and buy, helping to ‘get people off the fence.’ With likely further reductions throughout next year, this should provide stability, giving people the confidence to plan, which is essential for maintaining market momentum.
“With the Budget behind us, we now have greater certainty. Homeowners without second homes may feel encouraged by a rate drop, though those with holiday homes or rental properties may wait for further rate cuts before re-entering the market.
“We are cautiously optimistic but concerned about the future stamp duty rate change for first-time buyers. Do they realise how long it takes to complete a purchase? If the mortgage market reacts positively to today’s reduction, first-time buyers should seriously consider making their move to agree a purchase before Christmas, as delays could prove costly.”
Guy Gittins, CEO of Foxtons, said: “Whilst homebuyers will have been disappointed about the lack of a stamp duty relief extension in last week’s Autumn Budget, news today that interest rates have been cut will certainly help to boost their mood.
“The UK property market has already been showing strong signs of recovery in 2024 and this has been driven by improving market sentiment as a result of a more stabilised lending landscape.
“We also tend to see a wave of new buyer interest following a cut to interest rates, as those previously priced out of the market re-enter the fray and so today’s news will no doubt entice more buyers to make their move.
“With a stamp duty deadline now looming, we expect to see a supercharged level of market activity in the coming months as buyers look to complete before 1st April next year. Today’s decision to cut rates will only help add to this increased momentum and we now look set for a very strong end to the year and an even stronger start to 2025.
“There currently remains a good level of stock on the market, so whilst demand is set to climb, it’s unlikely to drive house prices to the same extent as it would in an under-supplied market.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Of all the factors influencing home-buying decisions, economic prospects and direction of travel for interest rates in particular have most impact.
“Today’s reduction will certainly give a kick to those sitting on the fence who are undecided about whether to stick or twist, coming on top of other recent positive housing market data.
“There’s more choice of stock now than a few months ago, so sellers need to remain competitive if wanting to take advantage of inevitable improved buying power as longer-term affordability concerns persist too.
“First-time buyers especially are looking to gain not just properties from investors withdrawing from transactions due to their higher stamp duty liability announced in the Budget but their own obligation to pay more of the tax from next April.”
Tim Bannister, Rightmove’s property expert said: “After the last Bank Rate cut, we saw a surge in home-moving activity, as mortgage rates trickled down and those home-movers looking for signs that rates might ease further were given confidence to get moving.
“We’ll be tracking the reaction to today’s cut, but we may see a more muted response, particularly as the cut has been widely expected and we’re heading into a traditionally quieter period for the market.
“However, even if we don’t see an immediate boost in activity, today’s news should support the optimism that we’re heading in the right direction, and that affordability will continue to improve in 2025.”
CEO of specialist lender Octane Capital, Jonathan Samuels, said: “Today’s decision to cut interest rates will bring some early festive cheer to the nation’s homebuyers who may still be haunted by the lack of a stamp duty relief extension in last week’s Autumn Budget.
“In fact, it’s fair to say that the long-term benefit of lower interest rates and the resulting increase in mortgage affordability is likely to entice more buyers into the fold compared to the number that might be deterred due to higher stamp duty costs.
“So all in all, today’s news will be warmly welcomed and we expect to see property market momentum continue to build, as buyers respond positively to improvements across the lending landscape.”
Mick Roberts
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Sign Up12:53 PM, 7th November 2024, About a month ago
Great all round info thanks Neil
Cider Drinker
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Sign Up16:19 PM, 7th November 2024, About a month ago
The labour market is predictable. Higher minimum wage = fewer jobs. Higher employer NI contributions = fewer jobs.
As for housing, would be tenants are buying their first homes while landlords sell.
Disgrunteld Landlady
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Sign Up5:25 AM, 18th November 2024, About a month ago
Did Shawbrook reduce their rates? I'm still waiting, waiting for the letter through the post as they seem incapable of getting to grips with emails. Been fab having been on 9%.. try to justify 9%! it was 100% increase.. I can assure you my rents didnt go up 100% .. they didn't go up at all until I fired my Agents.. all of them.