BoE Rate Cut Spurs UK Housing Market, Yet Concerns Remain
UK: Britain's housing market gained momentum in September, driven by the Bank of England's first interest rate cut in over three years and increased political certainty following the July 4 election. According to Rightmove, average asking prices for homes rose by 0.8% after a sharp 1.5% decline in August. This September increase, the largest for the month since 2016, brought the average asking price to £370,759 (USD 487,140), a 1.2% increase from the previous year. Tim Bannister, Rightmove's director of property science, said the housing market was invigorated by a new government and the first rate cut from the BoE since 2020.
Despite the positive momentum, Rightmove highlighted "still uncertainties ahead, including the timing of a second bank rate cut and which segments of the market could be affected by announcements in October's Autumn Statement." The BoE is expected to maintain the rate at 5% on September 19, with a 30% chance of an early cut noted last week. Cooling wage growth could lead to additional rate cuts by year-end. Prime Minister Keir Starmer's Labour government has promised to reform Britain's planning system and has set mandatory targets to speed up housebuilding, but the shortage of home supply is likely to remain a factor driving prices for the medium term. Rightmove's survey also revealed a 27% increase in sales agreements year-on-year, supported by lower borrowing costs. The average five-year fixed mortgage rate fell to 4.67% from 6.11% in July 2023. Additionally, a Royal Institution of Chartered Surveyors report showed a significant rise in sales expectations for the coming months.
Source : Reuters