Bank’s interest rate cut ‘could boost confidence in housing market’

The Bank of England’s decision to cut the base interest rate by 0.25% could help to boost confidence in the housing market but may not be enough to herald a significant cut in mortgage rates, according to one the UK’s largest estate agents, Zoopla.

Elizabeth Crouch Senior Associate Solicitor & Head of Residential Property reports.

Announcing the cut, the governor of the bank, Andrew Bailey, said: “Inflation has fallen a lot over the past 18 months. In part, that’s due to the fading impacts of global shocks like the war in Ukraine and Covid. 

“In part, it’s because higher interest rates have worked in helping to reduce inflationary pressure, and as a result, we’ve been able to cut interest rates by a little. But we need to ensure inflation stays low. 

“So, we’ll need to be careful not to cut interest rates too quickly or by too much. Ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.”

Zoopla’s director of research Richard Donnell said: “The cut to the base will deliver a further confidence boost to the housing market rather than heralding the start of a big drop in mortgage rates. 

“Mortgage rates have fallen this year which is why measures of market activity are all on the up. We are already on track for 10% more sales in 2024 and price rises of two percent. 

“Buyers are paying almost 97% of the asking price, which is the highest level for 10 months. The cut will support the current momentum in the market. 

“Mortgage rates of four to five percent are likely to be the new norm and while there is headroom for borrowing costs to fall further into 2025, it’s important would-be home movers speak to their bank or a broker to understand what they can afford.”

If you would like advice about the legal aspects of buying or selling a home please contact Elizabeth on 01697 72378 or click here to send her an email.