Mortgage and remortgage rates have been cut to incredibly attractive levels that would not have been expected with the Bank of England’s Monetary Policy Committee (MPC) having only cut the standard base rate one time so far this year. In the August MPC meeting, the committee voted to cut the rate by 0.25% to 5.0%. It was the first time the base rate had been cut since March 2020. It was a long time waited on since the expectation had been for the rate to be reduced in the start of the year, instead it took much longer. 

According to the recently released data from Zoopla, house prices were on the rise last month. The strong attention on the housing market from home buyers is credited to the recent cuts in lender mortgage rates. There is also more supply of properties available on the housing market and that has led to more competition between sellers for buyers. With lower interest rates, and therefore cheaper borrowing opportunities, and more homes to consider before buying, the housing market is much more attractive towards the end of the year than the beginning.

The UK housing market is in a period of growth. The reason the many house price indices are indicating strong demand is being credited to increased incomes and lower interest rates from lenders on mortgage offers. There has also been an increase of supply in available homes on the market, including starter homes for first-time buyers. Increased house prices reveal a healthy economy, but there is concern that house prices are already elevated from the buying boost caused by the pandemic when there were historically low interest rates. If house prices are on the rise, then what is ahead for home buyers and what will it mean for homeowners? We want a healthy and robust housing market, but rapid growth could be bad.

The UK housing market grew at the fastest rate in nearly two years in September according to data recently released by Nationwide. The average house price grew annually by 3.2% bringing it to £266,094. The strong demand from home buyers is being credited to the recent mortgage interest rate cuts by lenders and rising incomes. The data released by Nationwide reflects their own mortgage lending and not that of the market overall and does not include cash purchases.

The housing market has a dependency on first-time buyers, they are needed, or the entire system goes belly up. The system works that starter homes are purchased by first-time buyers, then in the usual process, the starter home is sold as the homeowner upgrades to a larger home for their growing family. Home movers changing properties due to relocation for employment often will upgrade according to the house prices of their new area. Without a first-time buyer to show attention in the market to the homes from first time homeowners, things slow down in the market and much of those homes that have difficulty in finding a buyer become part of a landlord’s portfolio and enter the rental market. 

Homeowners are certainly facing much better remortgage offers now than just weeks ago. Lenders have become competitive as economic optimism has grown with the lowering of inflation and the Bank of England’s Monetary Policy Committee (MPC) making a cut to the standard base interest rate in August. It was the first cut to the base rate since March 2020 when the rate was reduced to the all-time historic low of 0.1%. The most recent reduction took the base rate from a sixteen year high of 5.25% to 5.0%.