London, 19 August 2024: The UK property market showed a significant upturn as investors welcomed the recent decision by the Bank of England to cut interest rates during its August 2024 meeting. This is the first time that interest rates have been reduced in four years and the move has sparked an increase in buyer interest and housing prices as lenders have reduced borrowing costs making mortgage more affordable.

The number of potential buyers contacting real estate agents rose about 11% in July, according to data published by the property website Rightmove. The data also showed that buyer interest has surged by 19% in August compared to the same period last year.

All this comes as a result of the Bank of England recently reducing its base rate from 5.25% to 5% as the bank aims to relieve financial pressure on households as inflationary concerns have begun to ease. For the past 4 years the Bank had increased interest rates to combat the prevalent inflation resulting in high borrowing costs. But recent figures suggest that inflation has receded to about 2.2% in July, down significantly from its peak of 11.1% in 2022. The bank is expected to maintain a neutral stance till September before further slashing interest rates by 1.5 basis points, bringing it to 3.5% by the end of next year.

The market has historically seen a decline in prices in August when compared to July, and this year too the prices have fallen by an average of about 1.5% but it is soon expected to rebound in the active autumn market. Experts have predicted a strong autumn market backed by expectations of further interest rate cuts by the Bank of England. However, uncertainty around the budget and expiring mortgage deals remain a hurdle for price growth.

Tom Bill, head of UK residential research at Knight Frank, said: “Markets are pricing in a further cut in 2024, which means transaction volumes should be stronger this autumn than last year. That said, uncertainty surrounding the budget and wave of people rolling off favourable mortgage deals will keep a lid on price growth, which we expect to be 3% in the UK this year.”

With the rate cuts leading to availability of cheaper mortgages, buyer demand has seen an up-swing. Lenders have reduced borrowing costs significantly, now at 4.80% down from 5.82% in 2023. Pursuant to hopes of political stability and anticipated rate cuts, Rightmove has now revised its house price forecast for 2024 to a 1% rise in seller asking prices, which were formerly expected to show a 1% decline.

From a bird’s eye view, the borrowing costs are still higher than what they were in 2021, with millions of families unable to afford housing. The landslide victory for the Labour Party in the recent general election has no doubt increased buyer interest but challenges still remain. Investors are still cautious as the market is vulnerable to pricing in external factors, making it susceptible to volatility. However, any consolidation in the market is expected to be short-termed with expectation of overall steady growth in the coming years