The first Bank of England rate cut for four years at the start of the month has helped to accelerate mortgage rate drops and contributed significantly to improved buyer demand, according to Rightmove.
These better conditions are helping to set up a positive autumn market, and the resultant increase in activity has led Rightmove to raise its 2024 forecast from a 1% drop over the whole of 2024 to a 1% rise in new seller asking prices.
The Rightmove house price index shows the average price of property coming to the market for sale saw a seasonal drop of 1.5% this month (-£5,708) to £367,785.
However, new seller asking prices have fallen in the month of August for the past 18 years, and the size of this month’s drop was in line with the long-term average, Rightmove said.
“The first Bank Rate cut since 2020 has sparked a welcome late summer boost in buyer activity,” said Tim Bannister, Rightmove’s director of property science. “While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment.
“As the summer holiday season comes to an end, the conditions are there for a more active autumn market. The reaction from home-movers to what is hopefully only the first of several rate cuts over the next year or two, combined with other positive data and trends, has led us to raise our price prediction for the year.
“We now expect new seller prices to rise marginally by 1% over the whole of 2024. This is a relatively small revision from our original prediction of a 1% fall in prices over the year, since we didn’t initially forecast anything more drastic than a slight drop in prices this year.”
Since the Bank Rate cut on 1st August, the number of potential buyers contacting estate agents to view homes for sale is 19% higher than in the same period a year ago. This comparison is with a very subdued period in 2023, when the market was dealing with the fallout of unexpectedly high inflation figures and peak mortgage interest rates.
However, this improvement in the buyer demand trend from +11% across the month of July shows the immediate and strong impact of the first Bank Rate cut since 2020, said Rightmove. Agents have reported that increased political certainty and the improving economic outlook is also helping with buyer interest.
The number of sales being agreed between buyers and sellers continues to track very positively at 16% ahead of last year, and the number of new sellers coming to market is now 5% ahead of this time last year.
Mortgage rates continue to head downwards and have picked up some pace in recent weeks. The average five-year fixed mortgage rate is now 4.80%, which though still high compared with three years ago, before the first of 14 consecutive Bank Rate increases, is an improvement from 5.82% at this time in 2023.
Rightmove’s weekly mortgage tracker shows that the best available five-year fixed rate is now 3.83% for those with a 40% deposit, the lowest that a five-year fixed rate has been since the period before the mini-Budget in September 2022.
Bannister said: “Although it will likely take a few more cuts to the Bank Rate for home-movers to see a more substantial reduction in mortgage rates, it’s home-mover sentiment that has immediately been heightened.
“Buyers and sellers are more optimistic about the outlook for the market, evidenced by the immediate upturn that we’ve seen in activity. However, though optimism around the direction of mortgage rates is justified, the reality is that they are still very high compared with a few years ago, and there will be some who need rates to drop further before their affordability is notably improved.
“Buyers are still stretched, and so sellers mustn’t get too carried away by the higher buyer activity levels compared with last year, and continue to come to market with a competitive price.”
