The interest rate has been cut to five per cent, the Bank of England has announced.
Halifax, NatWest and Santander have all slashed their mortgage rate offerings, following Nationwide re-offering a sub four per cent mortgage last week.
Londoners have been struggling with mortgage repayments since interest rates rose to a 16-year high, while tenants have struggled with rising rents as landlords pass on increased costs.
The number of people in mortgage arrears is the highest it’s been in eight years, according to the Bank of England.
Equifax, a credit reference agency, has christened it the ‘cost-of-owning’ crisis, with over half of Brits reporting heightened anxiety over high interest rates.
Today’s news could be a relief to the London homeowners reporting to Equifax they have seen their monthly mortgage payments go up by £567 a month on average — more than £6,800 a year.
Property experts have also expressed relief at the news. “The Bank of England’s decision to also cut rates will fuel buyer activity further over the coming months,” said Matt Thompson, head of sales at Chestertons.“Some buyers eagerly anticipated a cut of interest rates in order to pursue their property search. Last month, we witnessed the return of some buyer confidence as lenders introduced slightly more attractive mortgage products.”
“It feels as though the property market has weathered the storm.”
“It feels as though the property market has weathered the storm and we should see activity pick up from September,” said Dominic Agace, chief executive of Winkworth, adding that this would be “the first of hopefully a succession of interest rate cuts”.
Mark Harris, chief executive of mortgage broker SPF Private Clients, welcomed the news but suggested caution.“This will give borrowers an affordability boost, ease pressure on household finances and in doing so, assist the wider economy,” he said. “Even if the new Labour Government manages to magic up an additional 300,000 homes this year, there is still a serious affordability issue for first-time buyers.”
North London estate agent Jeremy leaf said the rates reduction could be a “shot in the arm” for affordability. “In our view, when the interest rate decision has been so close to call it means the impact on the market will be relatively minimal one way or the other,” he said. “Of course, some buyers have been holding off in anticipation of a cut for some time but mortgage rates ‘on the street’ have been softening over recent weeks anyway.”
“Buyers need to be careful what they wish for as cheaper mortgages will almost certainly mean higher asking prices.”
House prices in London have been falling due to mortgage rates constraining affordability — but today’s news could reverse this trend. “Buyers need to be careful what they wish for as cheaper mortgages will almost certainly mean higher asking prices,” said Amy Reynolds, head of sales at Antony Roberts. “If we see a flurry of new applicants coming back to the market, encouraged by cheaper mortgage rates, then these higher prices are likely to be achieved.”
Emily Williams, director of research at Savills, said that house prices would not immediately go up, however.“Capacity for house price growth will remain limited until there is a more significant reduction in the cost of debt,” she said. “However, this is a clear signal to the market that the Bank feels it has turned a corner in the battle against inflation, and it should give most buyers and sellers confidence that the market will improve as we head into 2025.“The next question is when the Bank will reduce rates again, and whether we will see another cut in September or November,” added Harris.
