In the wake of the Bank of England’s first interest rate cut in four years, Britain’s biggest high street lenders have swiftly responded by slashing borrowing costs. This move has led to a surge in homebuyer activity, with Barclays, Halifax, HSBC, and NatWest now offering five-year fixed rate mortgages below the BOE’s key rate of 5%.
According to a recent report from property portal Rightmove, the best five-year fixed rate stands at 3.83% for buyers with a 40% deposit. This rate signifies the lowest level seen for such a product since before the U.K.’s mini-Budget in September 2022. The reduction in mortgage rates has been a result of lenders aligning themselves with the Bank’s 25-basis-point rate cut.
The easing of mortgage rates has ushered in an immediate upturn in buyer activity, driven by an improved economic environment and political certainty following the U.K.’s July general election. Rightmove reported a 19% increase in the number of house hunters contacting estate agents for viewings compared to the previous year. Additionally, there has been a 5% rise in the number of new sellers entering the market.
Tim Bannister, Rightmove’s director of property science, noted that while the rate cut has provided some relief to struggling homebuyers, further activity is anticipated in the coming months. The decrease in mortgage rates has boosted home-mover sentiment, with expectations of a rise in new seller asking prices by 1% in 2024, a reversal from the earlier prediction of a 1% fall.
Looking ahead, the BOE is set to meet on September 19 to make a new interest rate decision. Market data from LSEG indicates a 37% chance of a rate cut in September, with expectations rising to 74% for November. Peter Gettins, product manager at L&C Mortgages, highlighted that many buyers are closely monitoring the outcome of the meeting for insights into the future trajectory of mortgage rates. Another base rate cut in the coming months could further bolster buyer confidence.
The recent interest rate cut by the Bank of England has significantly impacted the mortgage market in the U.K., prompting lenders to lower borrowing costs and stimulating homebuyer activity. While the full extent of these changes remains to be seen, market participants are optimistic about the potential for further growth and stability in the housing sector. As the central bank deliberates on future rate decisions, stakeholders will continue to assess the evolving landscape of mortgage rates and its implications for the broader economy.