Halifax has released their latest data on the state of the UK housing market. According to the report, house prices reached a two year high in August. Prices were up 4.3% compared to last year and the average house price grew to £293,507. Much of the reasoning for the higher demand in the market is due to the lower mortgage rates offered by lenders, with many interest rates below the current Bank of England’s standard base interest rate of 5.0%.

On 1 August, the Bank of England’s Monetary Policy Committee (MPC) meeting resulted in a majority vote to cut the base rate for the first time since March 2020. The sixteen year high 5.25% was cut by 0.25% to 5.0%. However, lenders were optimistic it would occur and began cutting their rates before the MPC meeting. After the vote to cut the rate, lenders reduced their offers even more. 

There are now mortgage interest rates offered from lenders near or even below 4.0%. The opportunity to borrow at the cheapest rate this year has spurred new attention on the UK housing market.

The August average house price of £292,505 reported by Halifax is only slightly below the record reached in June 2022 of £293,507.

While the house prices increased by 0.3% in August, it was lower than the jump in July of 0.9% which was when the optimism of a rate cut grew stronger. While many home buyers are returning to the market, as they had left due to affordability, there are as many that are awaiting even lower rates. In anticipation of the likelihood of the MPC reducing the rate again this year, it is being hoped lenders will take an even deeper dive into lower rate offerings.

Whether or not first-time buyers will find climbing onto the property ladder possible as house prices rise despite lower interest rates is left to be seen. At the level house prices have risen, a deposit will be difficult to present to a lender. Saving for one during high inflation would have been difficult and lots of first-time buyers will be turning to parents, other family members and friends to get into a home.

Those home buyers waiting for lower rates, and even homeowners waiting on the MPC to reduce the rate again for lower remortgage interest rates, might be unaware the lower rates are already available. With rates below the base rate, one could consider there is little reason to wait to borrow when lenders have offered deals as if the second rate cut of the year has already happened.

The MPC will meet in a few days on the 19th, the day after the next inflation report is released. Of course, inflation data will influence the committee’s decision. Inflation has already hit target, hovered for another month and has now creeped upward to 2.2% and is supposed to remain slightly above the Bank’s target rate of 2.0%, but will drop below next year.

Experts therefore are not expecting the MPC to jump to another rate cut the following month from the first one. Instead, it is more likely that if they do vote for a cut, it will be in November. There will not be a meeting next month in October, making the following month a greater possibility for the MPC choosing a move to lower the rate if they get favorable inflation reports in September and October.

The November MPC meeting is scheduled early in the month on the 7th of November, and the inflation data release will be 20 November. The inflation report for December is released on 18 December, while the MPC will meet on the 19th. Having inflation reports for September, October, November, and December could also create a high expectation for the December meeting to be a prime moment for the second base rate cut for 2024.

To wait or not wait is the question for borrowers, for anyone would want to get the lowest interest available, but waiting too long, which is the case for homeowners moved to a SVR as they wait for lower rates to remortgage, might be a mistake. It could result in a homeowner paying more than necessary.

Waiting for another rate cut could be smart, or it could cost one more money. A lot will have to be taken into consideration for a home buyer or a homeowner. Home buyers might wait and face higher house prices, while homeowners could miss out on the best remortgage deals of now and also pay more on a SVR.

Borrowers do have better interest rates to choose from, and savings are available in comparing rates from not long ago. Borrowers could get even better ones in the weeks or months to come, but waiting could cost them more. To wait or not to wait, it’s an individual decision that should be considered carefully.