A boost for market sentiment
Many noted that the move would have a positive effect on sentiment in the housing market, with Jason Tebb, president of OnTheMarket, suggesting it would allow borrowers to ‘move ahead with more confidence’ and Nathan Emerson, CEO of Propertymark, saying the move was ‘a huge sigh of relief’ for borrowers that would provide ‘a new wave of confidence and affordability for many’.
Nicky Stevenson, Managing Director at national estate agent group Fine & Country, added: “Overall, the outlook for the market is more optimistic than it was in the beginning of the year, and is it expected to continue moving in a more positive direction. This rate cut is likely to have far more of an impact on the property market than the change in government.”
All eyes on mortgage rates
When the base rate changes, so do mortgage rates - and Tom Bill, head of UK residential research at Knight Frank predicted that, following the cut:
“Demand and transaction activity will increase when the autumn market gets underway in September and more mortgage rates fall below the 4% psychological threshold.”
Others noted that, while rates would not drop immediately, it would soon filter through - Stephanie Daley, Director of Partnerships at mortgage advisers Alexander Hall, said: "Over the past three years, many clients opted for longer mortgage terms, especially home movers and those remortgaging. The drop in base rate should ease affordability concerns, making longer-term lending, now available up to 40 years, more feasible and appealing."
One lender offering these long-term mortgages is Perenna, who offer 30-year products – however, their CEO, Arjan Verbeek, said of today’s news:
“Many will be rejoicing that the base rate has finally experienced its first cut since hikes began in December 2021, but in reality, consumers will soon feel shortchanged as they still won’t be able to access affordable mortgage products.
“Affordability is not actually linked to the headline mortgage rate on traditional mortgage products - but to the reversion rate or Standard Variable Rate (SVR). This is why we have an affordability crisis. So regardless of which way the market moves, unless the SVR reduces, we aren’t going to enter a promised land of extensive home ownership. The problems are systemic.”
Lots of market activity incoming?
Plenty of industry experts are predicting a boost in market activity – and not only for borrowers. Chris Gardner, CEO at Atelier, said that developers, lenders and buyers would all be breathing a ‘sigh of relief’ at the news, adding that it would be a ‘catalyst’ to get the market moving again. Chestertons’ head of sales Matt Thompson agreed, saying it would ‘fuel buyer activity further over the coming months’.r
Tim Bannister, Rightmove’s property expert, agreed, but noted that signs suggested many borrowers had ‘adjusted’ to higher rates this year and that 2024 had seen people ‘getting on’ with moves if possible despite the borrowing climate. He added that while he didn’t expect this rate cut to lead to ‘a rush of activity’ it would have a positive impact on home-mover sentiment that ‘bodes well for the Autumn selling season’.
However, Jeremy Leaf, north London estate agent and a former RICS residential chairman, said:
“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 per cent 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 per cent 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.”
Not just buying and selling
The move will have other impacts on the lending market, too – Ryan McGrath, director of second charge mortgages at Pepper Money, noted that lending for other purposes will increase. He said:
“This could usher in a new cohort of homeowners who, as they establish themselves, may consider putting their own stamp on their property in the form of home improvements. Homeowner loans can be another way for homeowners to fund these works without interrupting their current mortgage rate, particularly important for those who may be on more favourable fixed rates.”
Meanwhile, Chris Baguley, director at Together, said the rate cut would also be good news for SME property investors and developers, who he said were ‘key to providing future growth in the UK economy’.
He added:
“Earlier this week, we saw the deputy prime minister set ambitious housebuilding targets – signalling that the government is keen to get spades in the ground as quickly as possible. A rate reduction today will be a significant shot in the arm for many of our SME developer and investor clients, allowing them to press ahead with building the homes to meet the government’s ambitions.”
An opportunity for landlords
To top it off, other experts say the rate cut will benefit landlords who want to expand or step into property investment.
Aman Bajwa, director and co-founder of Fairbridge Capital, said that the rate cut was a ‘catalyst that many potential investors needed to begin, or expand, their portfolios’. He said:
“While the buy-to-let market has faced significant challenges over the last year, including higher mortgage rates and regulatory uncertainty, there is a wealth of opportunities on the horizon for more experienced landlords, particularly given the fact that Labour’s commitment to building new houses should address a chronic shortage of rental properties
“Flexibility will remain critical for investors to take advantage of these opportunities as and when they arrive.”
