Bank of England Cuts Interest Rates – Thoughts from the Industry
Rightmove’s mortgage expert Matt Smith says:
“Over the last couple of weeks, average fixed-rate mortgages have been slowly edging up in anticipation of today’s rise of 0.25% in the Bank of England Base Rate. There is unlikely to be any immediate changes in lender rates based on today’s decision, and lenders are instead likely to wait to see what the impact of the Bank’s comments on the outlook of the economy have on swap rates. An average five-year fixed 85% Loan-To-Value mortgage rate is now 4.52%, up from 4.44% last week.
“To put this into context, this amounts to a difference of £14 a month for someone purchasing an average property and spreading the cost over 25 years. So, while we may continue to see fixed-deals fluctuate slightly up or down in the short-term, buyers coming to market soon may find that the amount they need to repay each month doesn’t change significantly.
“Those on a tracker mortgage will be more disappointed with today’s news, as they may have thought that the Base Rate had peaked in March given some of the positive signs for the wider economy, and this is another cost they will need to factor into their monthly budget when the full rate rise is passed on.
“Buyer demand is now higher than pre-pandemic levels, most notably in the typical first-time buyer sector, so it is likely we will see lenders try to remain competitive to meet this demand. We’re also starting to see creative ways some lenders are trying to help segments of the market get onto the ladder with the launch of Skipton Building Society’s 100% mortgage product. While it is clearly designed to target a very specific segment of the first-time buyer market, given the affordability challenges many first-time buyers face, short-term innovations such as this are welcome to try and help more would-be first-time buyers own a home.”
Tim Bannister, Rightmove’s property expert said:
“This year we’ve seen signs that more people have adjusted to higher mortgage rate levels and generally, if they can, have been getting on with moves. The property market has been resilient, and even through the uncertainty of the recent election campaign, we saw home-moving activity continue on trend. Whilst I wouldn’t expect today’s Base Rate cut to lead to a rush of activity – as mortgage rates are still high and won’t drop significantly in the short term – it is likely to have a positive impact on home-mover sentiment which bodes well for the Autumn selling season.”
“The NFB welcomes the Bank of England’s decision to cut the base rate. From housing and commercial premises to renewables and roads, more affordable lending will help more projects get off the ground.
However, the clear message from today’s announcement was to not expect continued cuts, as the Governor of the BoE is cautious about cutting rates too quickly or by too much. This places greater pressure on the Government to deliver strategic reforms across planning, procurement, and regulation, which are essential to relieving some of the financial burdens that currently stop projects being delivered.”
Sam Lindsay, Mortgage Planning Advisor, My Mortgage Angel:
“It was all eyes on the Bank of England today and the rate reduction is welcome move for homeowners, mortgage brokers and lenders alike. What this means is that we should start to see more optimism in the housing market, bringing more movement and activity.
“We may start to see further incremental base rate drops before the year is out with a view to getting some stability back in the market as rates start to move back further towards the 4% mark within the next 12 months.
“Homeowners must keep in mind that if you look at the average between 1995 and 2022, the average interest rate was 5.62%, yet in 1998 the average rate reached a huge 8.87%, and in 2021 the average rate reached 3.59%. I believe we are on a downward trajectory for the average rate, but there are many factors which can affect that. For those wanting to move but are sitting on the fence, waiting for further reductions, buy with your heart – the right time to buy a new home is when it is right for you and your family.”
Kevin Shaw, National Sales Managing Director at LRG said:
“The reduction in interest rates announced by the Bank of England today is good news for the property industry and the millions of people wishing to move, remortgage or get onto the housing ladder after a period of uncertainty.
LRG has seen positive trading in July, with sales figures strong and an increasing number of new applicants registering. Today’s decision is a strong indication that growth is here to stay.
There’s lot of pent-up demand in the market after months of political uncertainty and today’s decision on rates is the starting pistol that we’ve been waiting for.
After a good July, we look forward to an even better August and the likelihood, in many cases, of getting people into their new homes before Christmas.”
Stephanie Daley, Director of Partnerships at Alexander Hall:
“The Bank of England’s decision to cut offers a significant opportunity for homeowners and home buyers. While mortgage rates may not drop immediately, this change should help release pent-up demand in the market, restoring confidence among buyers and those looking to move house who had delayed plans due to higher rates. Over the past three years, many clients opted for longer mortgage terms, especially home movers and those remortgaging. The drop in base rate should ease affordability concerns, making longer-term lending, now available up to 40 years, more feasible and appealing.”
Sarah Thompson, Managing Director, Mortgage Scout:
“It’s great news that the Bank of England has reduced the base rate by 0.25%. This reduction is a positive step towards stabilising the housing market and making homeownership more accessible.
“While this might not translate into significant immediate savings for all, it does improve overall affordability, especially for first-time buyers.
“Zoopla’s forecast of a 2% increase in house prices in 2024 indicates a robust market ahead. Additionally, some lenders, such as HSBC and Barclays, have already reduced their rates to below 4% in the last week in anticipation of the base rate cut, reflecting a proactive approach to the changing market conditions. However, it’s important to note that despite the reduction, the bank was cautious due to ongoing concerns about wage inflation and the need to ensure inflation remains sustainably below the 2% target.
“It’s absolutely crucial to stay informed and consult with a mortgage broker to ensure you are getting the best possible deal in these evolving conditions.”
Robin Rathore, CEO, Bamboo Auctions:
“Today’s interest rate decision is good news for buyers and continues to reaffirm our experiences over the last few months; that expectations are aligning and the market is moving quickly in the right direction.
Over the next six months, we expect more sellers (particularly landlords) to enter the market, brought about by Government policy and speculation about what is to come in the Autumn budget, so any moves by the Bank of England to help buyers with further drops in interest rates will be welcome news for estate agents who we believe will start to see an increase in transaction numbers.”
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