The Bank of England has cut the base rate for the first time since 2020, and lenders have followed.
At their August meeting, the Monetary Policy Committee cut the interest rate from 5.25% to 5%.
While mortgaged homeowners on fixed rates will not benefit immediately, it’s good news for buyers – raising hopes of a boost for house prices and market activity. The base rate cut is feeding through to banks and building societies, with buyers now able to access sub-4% interest rates with a 25% deposit.
However, the base rate is still significantly higher than they were before 2022, and further cuts are less likely after inflation rose to 2.3% this week. Economists also expect falling unemployment and above-inflation wage growth to encourage the Bank of England to keep rates up.
Rental effects
It isn’t just owner-occupiers and estate agents who stand to benefit. The cut is also great news for under-pressure landlords. According to Heather Powell, Head of Property at Blick Rothenberg, 710 buy-to-let properties were repossessed by lenders between April and June, a 13% increase compared to the previous quarter. Falling interest rates could help to reverse that trend. Landlords tend to buy their properties using interest-only mortgages, so a cut to their interest rates will have a bigger effect on their monthly payment than it would on a repayment mortgage.
Relieving the pressure on landlords could also be great news for tenants. Statistics from the Ministry of Justice showed that landlord possession claims were 9% higher between April and June 2024 than in the same period a year earlier. The main driver behind this is likely to be landlords selling their properties: data from the PayProp Rental Confidence Index released earlier this year found that 50% of property professionals identified landlord sales as the biggest reason for tenants moving. But if their expenses fall as a result of the cut, they may be more likely to hold onto their investments.
Other homebuying headlines
UK house prices ‘to rise through rest of year’ after jump in July – The Guardian
House hunting picks up as some buy after 20 minutes – BBC
Eye-tracker reveals truth about house hunters’ real interests – The Negotiator
