For the first time in two years, members of the Royal Institution of Chartered Surveyors (RICS) are anticipating house prices will increase in the near term. Since 2022, hopeful home buyers have been battling financial strains that were creating barriers to becoming a homeowner. Higher house prices that have remained elevated since the pandemic lifestyle buying boom, increased interest rates due to double digit inflation, and a lack of supply in starter homes coming onto the housing market have combined to make buying difficult. The subdued market has experienced house price increases and growth, but not to the level of the one expected.

The forecast for a more robust housing market is due to inflation having reached the target level of 2.0% last month, anticipation of the Bank of England’s Monetary Policy Committee (MPC) cutting the standard base interest rate for the first time since March 2020, and the general election having concluded.

The next opportunity for the MPC to cut the base rate will be 1 August as there is not a meeting set for July. 

The 17 July will bring another report on inflation and the outcome of that data will either bring greater confidence in a base rate cut in a few weeks or it will require patience for the rate reduction at the September MPC meeting. Either situation involves a rate cut to occur in the near future and it has been long awaited. 

The first cut to the sixteen-year high base rate was anticipated in early spring but was pushed off as inflation remained stubborn. Even in June when target had been reached, the MPC resisted cutting the rate too early and possibly risk having to reverse their decision. 

The optimism of a lower base rate in August has prompted lenders to lower their offered interest rates. This has brought an opportunity for borrowers to take advantage of cheaper borrowing despite the MPC having not yet voted to cut the base rate.

When the MPC does cut the rate, it will likely be small and possibly 0.25% which would move the base rate from 5.25% to 5.0%. Some lenders have already dropped their rates by 0.30% or more. 

The lower lender rates should indeed motivate home buyers that were either waiting for lower rates or those pushed out due to affordability to take another look at the housing market. While a boost is expected to the market, and growth overall for the market for the year, there is not a strong boost forecasted such as was seen when lenders offered historically low interest rate deals.

Not only are home buyers discovering borrowing opportunities, so are homeowners. When the rates were historically low due to the MPC having responded to the pandemic’s impact on the economy pushing the base rate to almost zero at 0.1%, many property purchases were completed. Homeowners coming to the end of their mortgage term obtained at that time are now in need of a remortgage.

Without a remortgage, their debt will be moved to their lender’s standard variable rate (SVR) which is not only likely more expensive with a higher rate but riskier as it is variable and subject to future rate hikes if the lender deems it appropriate.

Avoiding a SVR is considered a smart strategy when saving money is the goal.

Shopping for a remortgage is easy to do online. In a matter of minutes, after visiting the website of a remortgage broker, homeowners could have numerous quotes from a variety of lenders including having discovered exclusive deals. Borrowers could also go from lender website to website to gather quotes.

Once quotes are obtained, a homeowner simply needs to choose the best remortgage deal for their unique needs to take advantage of the lower rates currently available. 

As positive reports and outlooks on the UK housing market continue, there will be less fear for homeowners once worried about a declining market pushing them into negative equity. Instead, property values could increase making homeowners loan to value (LTV) ratios more favorable and qualifying them for better interest rate deals.

The outlooks for the economy, the housing market, home buyers and homeowners are more positive than in years past. To take advantage of that optimism, shopping around for the already attractive lender deals available prior to the MPC vote for a rate cut is all the remains.