(Bloomberg) -- UK house hunters stepped up their search after the Bank of England’s first reduction in interest rates in over four years and Labour’s election win created “buyer buzz,” Rightmove Plc said.
The online property portal said the number of buyers contacting estate agents to view houses for sale jumped 19% from a year ago since the BOE decision on Aug. 1, an acceleration from the 11% increase across the month of July. The number of sellers coming to market also rose by 5% compared to a year earlier.
The figures add to growing optimism that cooling mortgage rates will spark an upturn in the property market this autumn.
While the recovery in the housing market has been patchy in 2024, a recent decline in borrowing costs for homebuyers and the BOE’s policy pivot have increased confidence. Rightmove also attributed some of the upturn to Labour’s landslide election victory last month removing uncertainty for homebuyers.
“The first bank rate cut since 2020 has sparked a welcome late summer boost in buyer activity,” Tim Bannister, director of property science at Rightmove, said in a report Monday. “While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment.”
Rightmove upgraded its 2024 forecast for asking prices after the surge in activity in the property market since the central bank reduced rates from a 16-year high. It now expects a 1% gain in asking prices across 2024 as a whole, compared with its previous forecast for a drop of 1%.
Asking prices were down 1.5% month-on-month in August, a quiet month in the housing market that traditionally sees a dip in valuations. They were up 0.8% on a year earlier.
The average two-year fixed mortgage rate has fallen to 5.66%, down from around 6% earlier in the summer, according to Moneyfacts. However, borrowing costs may only come down gradually as traders expect the BOE to take a cautious approach to easing policy restriction.
Currently investors are only fully pricing in one more quarter-point cut by the UK central bank by the end of the year.
Other property market indicators have also pointed to an upturn. Halifax’s indicator showed prices rising by the most since January last month, while Nationwide Building Society’s measure also showed gains in July.
Bannister said pent-up demand has been unleashed by the rate cut and Labour’s election win on July 4.
“That election came much earlier than people were expecting, and was obviously quite emphatic so it removed a large amount of uncertainty,” he said in an interview on Bloomberg Radio.
Bannister added that there were “positive signs” from Labour’s plans to boost homebuilding and affordability. The new government wants to built 1.5 million homes over the next five years by overhauling the planning system, which has held back developments.
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