The Office for National Statistics (ONS) reported the sixth month of annual increases for the average UK house price. In the year to August, the average house price had risen to £293,000 or 2.8%. The increase in demand in the housing market has been credited to lower mortgage interest rates and growth in the supply of available properties on the market. The expectation is for a continued increase in the UK average house price throughout the year as the cost of borrowing could decline even further.

The lending market is very competitive currently. Mortgage offers are lower than the Bank of England’s standard base interest rate. The base rate is 5.0% having only recently been reduced from 5.25%, which was the first since March 2020. In August, the Bank of England’s Monetary Policy Committee (MPC) voted by majority to reduce the rate and though it was strongly welcomed, it was months later than the early spring cut that was highly anticipated this time last year. 

In summer, lenders were optimistic that the first rate cut in four years was near and began to cut their own rates prior to the MPC making their decision. After the base rate cut, lenders continued to lower their own offerings, taking mortgage offers below the base rate with many now to be found below 4.0%. 

This presents borrowers with the unique advantage of not having to sit and wait on the MPC’s second cut to take advantage of lower rates. For even if the MPC does not lower the base rate again, it could appear it has already happened when shopping for mortgage or remortgage deals.

Inflation had been expected to stay above the target of 2.0% until early next year when it would fall below the target rate set by the Bank. However, as reported in the twelve months to September, inflation fell to below target at 1.7%, down from the previous report of 2.2%. This has triggered expectations of another rate cut possibly in November. 

Without a MPC meeting in October, it allows the impact of a lower inflation rate to take hold. The next meeting of the committee will be 7 November. The next inflation report will be released on 13 November. The MPC could remain cautious and allow another month to pass and wait until December when they would have in hand the year’s final two inflation reports. The inflation report will be released on 11 December, and the MPC meeting is scheduled for 19 December.

Now, the forecast is for a cut in November, but again, forecasts are not what the MPC uses to make decisions, proven by their denying the early spring cut or even the late spring cut, and waiting until the end of summer to offer the first cut in four years. 

If there is a cut in either November or December, it will likely mimic the first one for 2024 and be a reduction of another 0.25% taking the rate to 4.75%.

The lower mortgage rates, lower inflation, and optimism for another base rate cut should be motivating home buyers to return to the housing market or bring out new buyers intent on leaving behind rising rental costs. Therefore, continued increases to the average house price would be expected.

For homeowners, they too should be optimistic about the current state of the economy. With a strong housing market there is little worry as there was last year of the possibility of newer homeowners declining into negative equity and being out of reach of a remortgage. Also, there are lower than expected remortgage rate offers at or under the current base rate. While inflation reduction will take a bit to trickle down to impact consumer budgets, knowing it is going to be better will likely be enough to motivate them to take a deep breath and exhale. Perhaps, now one can worry less about affordability issues to remain a homeowner and look to saving money with a new remortgage strategy.

The last part of the year certainly has the makings to be a dramatic difference for borrowers than the start of the year, which for all intents and purposes was more optimistic than all of last year. To make the start of the new year one to gain peace of mind, homeowners simply need to quickly and easily gather remortgage quotes by shopping online. Then review and compare them to find the very best remortgage deal for their unique needs.