Richard Newstead | moment |
LONDON — Britain's biggest retail banks continue to sharply cut their borrowing costs after the Bank of England's first interest rate cut in four years sparked a boom in home buying.
Barclays, Halifax, HSBC and NatWest are among the lenders currently offering five-year fixed-rate mortgages at rates below 4%, which is below the BOE's base rate of 5%.
The best five-year fixed rate is currently 3.83% for buyers with a 40% deposit, according to a new report from property portal Rightmove. This is the lowest level for such a product since the UK's disastrous mini-budget in September 2022.
This follows a previous easing in tracker rates, which was in line with the bank's 25 basis point rate cut earlier this month.
The improving economic environment and political certainty brought about by the British general election in July led to an “immediate increase” in buyer activity, Rightmove noted.
The number of home buyers contacting real estate agents for viewings increased by 19 percent year-on-year following the BOE's August 1 decision, the portal said in its report, adding that this was a significant increase from the 11 percent annual increase recorded in July.
The number of new sellers entering the market is also up 5% this month compared to last year. The number of agreed sales, meanwhile, is 16% higher than a year ago when mortgage rates were at their peak.
Tim Bannister, director of property science at Rightmove, said the rate cut, while minimal, had provided some relief to struggling homebuyers and he expected a further pick-up in activity in the autumn.
“Although mortgage rates have not fallen significantly since the rate cut, the fact that the long-awaited first cut has finally occurred and mortgage rates are trending downward is positive for sentiment among those planning to move,” he said in the report.
Rightmove now expects new sellers' asking prices to increase marginally by 1% in 2024. This is an upward revision from its previous prediction of a 1% price decline.
The BOE will meet on September 19 to make a new interest rate decision. The markets are currently calculating a probability of around 37 percent for a rate cut in September, with expectations rising to 74 percent for November, according to data from the LSEG.