The U.K. is witnessing an increase in property market activity as real estate agents report a rise in demand from buyers following the Bank of England’s first interest rate cut in four years. Since the central bank’s rate cut on August 1, the number of potential buyers contacting estate agents to view homes for sale saw a 19 percent annual increase, property website Rightmove said on Monday
This comparison, however, is with a very slow period in 2023 when the U.K.’s property market was dealing with the fallout of unexpectedly high inflation figures and peak mortgage interest rates. Nevertheless, this improvement in the buyer demand trend from an 11 percent increase in July shows the immediate and strong impact of the first interest rate cut since 2020.
Agents also reported that increased political certainty and the improving economic outlook are also helping with buyer interest.
Property market’s outlook positive
As anticipated in Rightmove’s July report, the first Bank of England rate cut at the beginning of the month has helped accelerate mortgage rate drops and contributed significantly to better buyer demand. These conditions are helping the U.K. property market’s outlook for the next few months, prompting Rightmove to raise its 2024 forecast from a 1 percent drop this year to a 1 percent rise in new seller asking prices.
This month, the average price of property coming to the market for sale saw a seasonal drop of 1.5 percent to 367,785 pounds.
“While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment,” stated Tim Bannister, Rightmove’s director of property science.
Sale transactions up
The report added that despite some uncertainties ahead, October’s Budget, the timing of a second rate cut, and the U.S. economy, will likely set for a positive remainder of the year for the U.K. property market.
The number of property sale transactions continues to track very positively at 16 percent ahead of last year. Meanwhile, the number of new sellers coming to the U.K.’s property market is now a stable 5 percent ahead of this time last year.
“While August is generally a slightly quieter month due to the holiday season, the market continues to show resilience and is ticking over steadily,” stated Gareth Overton, head of residential sales at Henry Adams.
Read: China’s home prices hit new nine-year low in July
Mortgage rates decline
Mortgage rates across the U.K. property market continue to decline and have picked up some pace in recent weeks. The average five-year fixed mortgage rate is now 4.80 percent, which is still high compared with three years ago. However, it is an improvement from 5.82 percent at the same time in 2023.
Rightmove’s weekly mortgage tracker shows that the best available 5-year fixed rate is now 3.83 percent for those with a 40 percent deposit, the lowest that a 5-year fixed rate has been since the period before the mini-Budget in September 2022.
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