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Rightmove said the Bank of England’s first interest rate cut in four years earlier this month accelerated the decline in mortgage rates and was a major factor in improving buyer demand.
These improving conditions have helped fuel a buoyant market in the autumn, with the resulting increase in activity leading Rightmove to raise its 2024 forecast to a 1% increase in asking prices for new sellers, down from a 1% decrease for the whole of 2024.
The average price of a property for sale fell 1.5% (-£5,708) to £367,785 this month, a seasonal decline, according to the Rightmove House Price Index.
However, Rightmove said asking prices for new sellers have fallen in August for the past 18 years, and this month’s fall is in line with the long-term average.
“The first bank rate cut since 2020 has been a welcome boost to buyer activity at the end of the summer,” said Tim Bannister, director of property science at Rightmove. “Although mortgage rates are yet to fall significantly since the rate cut, the long-awaited first cut has finally arrived and mortgage rates are trending downwards, which is positive for homebuyer sentiment.”
“As the summer vacation season draws to a close, conditions are ripe for a more active fall market. Homebuyer response to what we hope is just the first of several rate cuts over the next year or two, combined with other favorable data and trends, have led us to raise our price forecast for this year.
“We now expect new sales prices to increase slightly by 1% for the whole of 2024. This is a relatively small revision from our initial forecast of a 1% annual price decline, as we did not initially expect any dramatic changes beyond a slight decline in prices this year.”
Since the bank rate cut on 1 August, the number of potential buyers contacting estate agents to view homes for sale has increased by 19% compared to the same period last year. This compares with a very weak period in 2023, when the market was dealing with the effects of unexpectedly high inflation and peak mortgage rates.
However, Rightmove said the improving trend in buyer demand, from +11% for the whole of July, illustrates the immediate and strong impact of the first bank rate cut since 2020. Estate agents report that increasing political certainty and an improving economic outlook are also boosting buyer interest.
The number of transactions agreed between buyers and sellers continues to perform very well, up 16% on last year, and the number of new sellers entering the market is also up 5% on the same time last year.
Mortgage rates continue to trend lower, with some increases seen in recent weeks. The average rate on a five-year fixed mortgage is currently at 4.80%, still higher than it was three years ago, before the first of 14 consecutive bank rate hikes, but an improvement from 5.82% at this time in 2023.
For someone with a 40% down payment, the best five-year fixed rate currently available is 3.83%, the lowest five-year fixed rate since the pre-September 2022 mini-budget period, according to Rightmove’s weekly mortgage tracker.
“It will probably take a few more bank rate cuts before homebuyers see a more substantial reduction in mortgage rates, but there has been an immediate boost in homebuyer sentiment,” Mr Bannister said.
“Buyers and sellers are becoming more optimistic about the market outlook, as evidenced by the immediate pick-up in activity. However, while optimism about the direction of mortgage rates is justified, the reality is that they are still significantly higher than a few years ago and some people will need rates to fall further to see a significant improvement in their ability to repay their mortgage.”
“Buyers still have their hands full, so sellers need to not get too carried away with the increased levels of buyer activity compared to last year and continue to enter the market at competitive prices.”
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