The first Bank of England rate cut in four years has triggered an immediate upturn in the UK property market, as cheaper mortgages prompt interest among buyers and drive up house prices.

Figures from the property website Rightmove show the number of potential buyers contacting estate agents about homes for sale since 1 August jumped by 19% compared with the same time a year ago. Contacts in July were up 11% on the previous year.

The Bank cut interest rates on 1 August for the first time since the start of the Covid pandemic, easing pressure on households after it had raised borrowing costs to the highest level since the 2008 financial crisis to tackle soaring inflation.

It cut its key base rate from 5.25% to 5%, after a fall in inflation back to more normal levels this year. Figures last week showed inflation rose to 2.2% in July, above the Bank’s 2% target. However, it remains significantly lower than a peak of 11.1% two years ago after the Russian invasion of Ukraine triggered a surge in energy prices.

Rightmove said the Bank cutting borrow costs had helped to accelerate the availability of cheaper mortgages from high street lenders, alongside contributing “significantly” to improved buyer demand.

It said future Bank rate cuts would establish a buoyant autumn property market, and it upgraded its house price forecasts from a 1% drop over the whole of 2024 to a 1% rise in new seller asking prices.

Financial markets widely expect that the Bank will react to fading inflationary pressures by cutting rates further, possibly to as low as 3.5% by the end of next year. The Bank is expected to keep rates on hold at its next meeting in September before restarting reductions in borrowing costs in November.

Source: The Guardian