The property market received a boost today, with the Bank of England cutting the base rate from 4.25% to 4%.
The quarter-point cut, announced by the bank’s Monetary Policy Committee today, is the fifth reduction in 12 months.
The decision is good news for buyers or property owners seeking to remortgage, and will also be welcomed by businesses.
Banks and building societies are heavily influenced by the base rate when determining the interest rate they charge borrowers.
When the base rate is falling, mortgage interest rates tend to follow in the same direction.
Looking ahead
Financial analysts predict that the BoE will squeeze in another rate cut this year in a bid to stimulate the economy.
The next meeting of the Bank’s MPC will take place on September 18.
However, the BoE may not instigate another cut quite as soon as September.
In a statement today, it said: “A gradual and careful approach to the further withdrawal of monetary policy restraint remains appropriate.”
Other news from the property market
Many people assume that the property market slows in the summer.
But property portal Zoopla says there’s been a summer surge in activity this year.
In its most recent report, Zoopla says buyer demand in June was 11% higher than at the same time last year. Sales agreed were up by 8%.
Overall, it predicts that there will be 5% more property sales this year than last.
However, price growth will be just 1%, as buyers grapple with economic uncertainty and higher stamp duty costs.
First-time buyers
Several factors have shifted in recent months in favour of first-time buyers.
Firstly, policymakers have relaxed lending rules. This means lenders can now offer more high loan-to-income deals (these are deals equal to or more than 4.5 times a buyer’s income).
Meanwhile, affordability has improved. According to Nationwide’s chief economist, Robert Gardner, the price of a typical UK home is now about 5.75 times average income.
At its peak in 2022, the average property was 6.9 times the average income.
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