"This long-awaited interest rate cut is excellent news for the housing market, with commentators now predicting one or possibly two more rate cuts before the end of 2024"
- Nicky Stevenson - Fine & Country
After years of economic uncertainty, the Bank’s decision to reduce interest rates for the first time since 2020 signals a cautious but positive outlook on controlling inflationary pressures. The Monetary Policy Committee voted 5 to 4 in favour of the reduction, marking a significant moment for homebuyers and the property market.
Boost in market confidence
The interest rate cut, alongside greater political clarity, is expected to bolster housing market confidence. Mortgage rates, which had already started to decline in anticipation of this move, are becoming more affordable and there is hope that further cuts will follow. Nationwide has reintroduced sub 4% fixed-rate mortgages, and major lenders like Barclays and TSB have also reduced their rates.
Nicky Stevenson, Managing Director of Fine & Country, commented: “This long-awaited interest rate cut is excellent news for the housing market, with commentators now predicting one or possibly two more rate cuts before the end of 2024. Lower borrowing costs are a welcome relief for homebuyers and those looking to refinance their mortgages. We anticipate that this will lead to an increase in market activity and growing confidence among buyers and sellers.”
Positive indicators for market activity
Despite subdued transaction levels, leading indicators suggest a sustained momentum in the market, despite the general election. Mortgage approvals remained broadly stable at 60,000 in June, nearing their long-term trend. Affordability metrics are encouraging too, supported by better mortgage rates and continued strong earnings growth. With growing market confidence, sales volume expectations for the next three months have reached their most upbeat level since January 2022, according to RICS.
“The market is showing strong signs of recovery,” said Stevenson. “With mortgage approvals stabilising and affordability metrics improving, we are seeing growing confidence among buyers. This is reflected in the number of sales being agreed, which is up 16% compared to last year, and a steady increase in new sellers entering the market.”
Rising prices and decreased time to sell
According to Nationwide, the average house price in July reached £266,334, a 2.1% year-on-year increase, marking the highest annual growth rate in 19 months. In another signal of an improving market, Zoopla reports that buyers are paying closer to asking prices, with the average now at 96.8%, up from 95.4% last November. Additionally, the average time to sell has dropped for the fifth consecutive month to 59 days in June.
“The rise in house prices and the reduced time to sell are clear indicators of a recovering market,” Stevenson noted. “We expect house prices to increase by 2% by the end of the year, further affirming the positive trend we are witnessing.”
Prime market
In the prime market, the average property price is £1.24 million, slightly down by 2.9% year-on-year. However, regions like Scotland and the East Midlands are experiencing positive growth, with annual increases of 9.3% and 0.4%, respectively.
The government’s announcement to impose VAT on private school fees has led to increased demand for homes near outstanding-rated schools. A recent poll indicates that 24% of agents have noticed this trend.
Home building targets
Just 114,000 new homes were built in the first half of 2024 in England and Wales, an 11% decrease compared to the same period in 2022. The NHBC has suggested that the rate of new home delivery will need to more than double to meet the government’s target of 1.5 million homes over the next five years.
The government has made clear its commitment to getting new homes built to address the housing crisis, with much hope hanging on the Planning and Infrastructure Bill to create a more efficient and better-funded planning process.
Stevenson concluded: “The recent interest rate cut and improving economic indicators provide a much-needed boost to the UK housing market. With increased market confidence, rising prices, and a more affordable borrowing environment, the outlook for the remainder of 2024 is optimistic."
