Rightmove reports that the Bank of England’s decision to cut interest rates earlier this month has significantly boosted buyer activity in the housing market.
According to Rightmove, there has been a notable increase in enquiries about properties since the rate cut on August 1st. Estate agents have observed a 19% rise in the number of potential buyers contacting them compared to the same period last year. This sharp increase in interest underscores the immediate effect of the rate reduction on market dynamics. The boost in activity suggests that the lower rates have revitalised buyer enthusiasm and increased engagement in the property market.
The increase in buyer activity follows the Bank of England’s decision to cut interest rates for the first time in over four years, reducing the rate from 5.25% to 5%.
Tim Bannister from Rightmove noted that this rate cut has led to a noticeable rise in buyer interest as summer ends. He acknowledged that although mortgage rates have not dropped significantly yet, the initial rate cut and the subsequent downward trend in rates are encouraging for those looking to move home.
With the end of the summer holiday season approaching, the housing market is expected to become more active in the autumn.
Rightmove reported that despite a sluggish housing market throughout 2023 due to high rates, the figures from August show a notable increase. This comes after an 11% rise in enquiries during July. The average interest rate for a five-year fixed-rate mortgage is now 4.8%, a decrease from 5.82% last year when the Bank of England’s rate was 5.25%.
The latest research shows that average asking prices fell by 1.5% to £367,785, which represents a monthly decrease of £5,708. This drop occurred between 7 July and 10 August, reflecting a notable shift in the market over this short period.
Rightmove attributes this decrease to seasonal trends that typically affect the housing market. Historically, this drop has been observed for the last 18 years, coinciding with the summer holiday season. During this time, many sellers choose to postpone their plans to move, as they take time off for vacations.
The seasonal dip in prices is therefore seen as a recurring pattern rather than an indication of a market downturn. The usual slowdown in market activity during the summer months leads to fewer properties being listed, which can contribute to this temporary fall in asking prices.
The report revealed that average asking prices have increased by 0.8% compared to a year ago, showing a slight improvement over the 0.4% rise recorded in the previous month. This uptick suggests a gradual recovery in the housing market, despite ongoing economic uncertainties.
Nathan Emerson, chief executive of Propertymark, emphasised the urgent need for a boost in market confidence. He noted that the housing sector has been grappling with economic disruptions over the past three years, from 2020 to 2023. Emerson pointed out that the market has struggled to regain stability and growth amidst these challenges.
Looking ahead, Emerson suggested that if inflation continues to decrease, it could create an opportunity for the Bank of England to implement further interest rate cuts. He highlighted that the recent reduction in interest rates had already triggered a modest increase in housing market activity. According to Emerson, additional rate cuts could provide a much-needed lift to the market, helping to stimulate further demand and investment.
Rightmove has recently adjusted its house price forecast for the remainder of the year, now projecting a 1% increase. This new forecast reflects more optimistic market data and trends observed in recent months, marking a shift from the earlier, more cautious outlook for 2023.
The property website had originally expected house prices to decrease by 1% during 2024. However, the updated forecast suggests that market conditions have improved enough to warrant a positive adjustment. This change indicates that the housing market is showing stronger signs of recovery and resilience than previously anticipated.
Financial markets are currently forecasting a 31% chance that the Bank of England will lower interest rates during its next meeting in September, according to data from the London Stock Exchange. This figure represents a cautious outlook from investors who are closely monitoring economic indicators and central bank signals.
In comparison, markets are predicting an 82% probability of a rate cut occurring in November. This higher expectation reflects growing anticipation of further monetary easing later in the year. The shift in these forecasts follows a recent uptick in the official inflation rate, which rose to 2.2% in July. This marks the first increase in inflation in six months, highlighting a potential shift in the economic landscape that could influence future monetary policy decisions.
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