Halifax is forecasting the housing market to continue to experience a rise in demand to the end of the year after it experienced a jump in July. The recently released data by Halifax for July revealed the average house price as £291,268. This is a 0.8% increase over June’s average house price of £289,042. The boost to the market is being credited to lenders reducing their interest rate offers prior to the Bank of England’s Monetary Policy Committee (MPC) meeting to consider a cut to the standard base rate. The forecasts were strong for a rate cut in August or at the latest September, and therefore lenders took the initiative and began to cut their own rate offerings with some falling below the level of the outcome of a base rate cut.

The MPC did cut the rate by 0.25%, reducing the 5.25%, 16-year high to 5.0% on the first day of August, confirming the expectations of lenders keen to offer their own cuts early. It was the first cut to the base rate since March 2020 when the committee took the rate to an all-time historic low of 0.1% due to the global COVID pandemic. 

The rate began to rise in every MPC meeting from December 2021 to August 2023. In September 2023, the committee voted to keep the rate steady and did so until the latest meeting on 1 August. 

The expectation for a rate cut was triggered by inflation lowering from double digits to finally reaching the target rate of 2.0% in May.

Cheaper borrowing is not the only motivation for home buyers and home movers to return to the housing market. There is a higher supply of properties available, and sellers are taking competitive offers from buyers to take advantage of the influx of new demand. 

Amanda Bryden, head of mortgages with Halifax, remarked, “Against the backdrop of lower mortgage rates and potential further base rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year.”

Lending is perhaps as cheap as it has been since the pandemic with some lenders dropping their rates below the now new base rate of 5.0%. UK’s largest lender, Nationwide, is offering a 4% deal for qualifying buyers. 

While the lowest interest rates might not be available to first-time buyers, or those with complicated credit histories, or lower deposits, there are indeed attractive deals to find.

Mortgages are lower than remortgages available on the market as lenders are primarily responding to the strong demand for home purchases. However, homeowners could find their own substantial savings by shopping for a remortgage deal online. Brokers not only make remortgage shopping online quick and easy by possibly providing numerous quotes from a variety of lenders, but they could also have exclusive deals for borrowers.

There is concern for first time home buyers as demand grows in the housing market, as it will mark growth in the average house price. Not only are house prices still elevated from the buying boom from the pandemic, but inflation has strained household budgets and made savings difficult including saving for a house purchase deposit.

The largest average house price increase reported by Halifax was in Northern Ireland at 5.8% to £195,681 in July. The second largest increase was experienced in the north-west of England with a 4.1% July increase to £232,489. London remains the area with the most expensive properties with an average house price of £536,052 which is a 1.2% annual increase.

There could be an even higher demand on the housing market should the MPC decide to make another rate cut in September. They will receive two inflation reports since their last gathering and before the meeting on 19 September, and if all is well, then there could be even more relief on the way as lenders decide to cut their rates even more in the next few weeks.

If the MPC holds the rate steady to allow inflation to react to the rate cut from August, and demand for lending grows, lenders could pull their best rates, but those are meant for a unique group of borrowers. For first time home buyers, and home movers that were dissatisfied with rates from only months ago, there are savings and attractive deals available now. Opportunities for homeowners in remortgaging are there to be discovered as well.