The housing market is likely to see a spark of buying in the next release of data. There are many reasons for home buyers to take a better look at the market now. One reason is interest rates dropped as the confidence in a sooner rather than later cut to the standard base interest rate was expected by the Bank of England’s Monetary Policy Committee (MPC). Lenders did not even wait on the MPC and dropped their offered rates with some doing so to a lower level than the outcome forecasted when the MPC would finally have the majority vote to cut the rate.

On 1 August, the committee met and voted for a rate cut of 0.25%, which was the first cut to the base rate since March 2020. The decision took the base to 5.0% from 5.25%. Because lenders began cutting their rates prior to a decision by the MPC, mortgage offers could be found near the 4.0% level. 

Including the motivation of lower interest rates, home buyers have been relieved of the long-time strain from inflation. The inflation rate had reached double digits and finally lowered to the Bank’s target rate of 2.0% in May. With lower inflation, consumers could have gained confidence in their financial future and ability to afford the purchase of a home.

Affording a home has also been helped along by sellers. When there were signs demand would be returning to the market, sellers became competitive to find a buyer quickly and asking prices reflected their efforts. According to Rightmove, a property listing website, the average asking price of properties coming on to the market fell in August by 1.5% month-on-month. This was the equivalent of a decline of £5,708 for buyers. The average house price for August was £367,785.

There has also been an increase in the volume of properties available to home buyers. This has a positive impact on the housing market. This could offer more first-time buyer properties as well as homes growing families often consider for their next purchase. An increase in supply offers more choices and variety and creates greater attention or perhaps even renewed attention from hopeful home buyers.

The data proving the growth in demand from home buyers was reported by Rightmove. Their report revealed a 19% increase in the volume of potential buyers contacting estate agents compared to the same time period last year. The jump in potential buyers grew 11.0% in July. 

Tim Bannister, Rightmove’s director of property science, remarked, “The first Bank Rate cut since 2020 has sparked a welcome late summer boost in buyer activity. 

“While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment. As the summer holiday season comes to an end, the conditions are there for a more active autumn market.”

The increase of attention in the housing market is a welcomed positive sign for homeowners. There had been many times since inflation took hold and interest rates had risen that homeowners were warned if house prices declined so could their property values. For newer homeowners there is the risk of falling into negative equity should their home value fall below the amount of debt in their mortgage.

Negative equity could block the homeowner from obtaining a remortgage when their mortgage term came to end. Without the ability to remortgage, their lender would transition them to their standard variable rate (SVR) which could have the homeowner paying more than necessary. A SVR could be double or more the interest rate level of a remortgage. Therefore, if the homeowner is blocked from a remortgage they could lose out on a substantial amount of savings. The lack of warnings of declining property values is good news for homeowners.

Many borrowers are hoping for another rate cut before the end of the year. The next possibility is in a few weeks. On 19 September, the MPC will meet following the next released report on inflation the day prior on 18 September. The expectation is that the MPC will hold the rate steady and allow inflation to settle back toward target as it rose slightly this month. It is expected to remain above target throughout the rest of the year and fall below target in 2025. 

While home buyers are finding parts of home buying are coming together to offer the best opportunity for them this year, homeowners are finding they can exhale and worry less about the uncontrollable situations that could have put a remortgage out of reach. These things offer a positive outlook for home buyers, homeowners, the housing market and the economy overall.