The Bank of England today announced that it would hold the base rate of interest at 5% following a month of speculation about whether it would be reduced or not. The vote was 8-1 in favour of maintaining the rate at 5%.
This follows the August meeting where the Bank did cut the base rate from 5.25% following improved economic performance. That cut led to immediate gains in house prices and a fresh wave of confidence entering the property market.
It also had a positive effect on mortgages. As Rachel Springall, financial expert at Money Facts Compare, explains: “The mortgage market has seen a bustle of activity over the last month, with the Bank of England base rate cut, and a more favourable swap rate market, creating a positive influence on fixed rate pricing.
“There have also been several lenders passing on the 0.25% base rate cut to customers, leading to the Standard Variable Rate (SVR) falling below 8% for the first time since August 2023. The expectations for another base rate cut are mixed, but it looks more likely that the next drop could come in November, which is after the Budget.”
Borrowing is now more accessible in the UK than it has been for a long time. Alongside that fall in the standard variable rate, we have also seen average two-year and five-year fixes fall to the lowest levels since before the Truss government’s budget which caused mortgage rates to rise to record levels.
All things considered, this is a good time to buy property in the UK and make the most of the improving market – both today and in the future. Long-term forecasts have improved along with the short term gains that are now on offer.
In that context, the Bank of England announcing today that the base rate of interest will stay at 5% is not a blow to the market, property owners or property buyers.
Instead, today is about stability and making sure that the gains made since August are the beginning of long-term growth and a new property cycle that delivers strong returns for property owners not just in the immediate future, but over the course of a whole new property cycle.
The Office for National Statistics reports that house prices (1.6%) and rents (8.4%) are both rising at the moment.
In places like Manchester, house prices are growing even faster at a rate of 3.9% as the city continues to cement itself as one of the UK’s strongest investment locations.
With a slight slowdown in the rate of national economic growth and inflation sticking at 2.2%, the Monetary Policy Committee at the Bank decided to maintain the rate that is working for another two months.
Looking to the future, more rate cuts are expected from the Bank before Christmas to finish off the year on a high note. The City of London is expecting a cut to 4.75% in November, followed by a further cut in December to bring the final interest level for the year to 4.5%.
If that comes to pass, it will act as a booster for the housing market at the beginning of 2025. January is always a busy time for property buyers, and it will be even more so if interest rates fall and borrowing becomes cheaper again.
If you want to get ahead and make sure you are ready to make the most of the next property cycle, this is a great time to look at your next purchase.
Browse our available UK property investments for sale and get in touch with the team today.
