UK House Prices See Rare Dip as Interest Rates Fall

A recent cut in interest rates by the Bank of England has led to a rare dip in UK house prices, with new sellers listing their homes for an average of £367,785, down by £5,708 (1.5%) from the previous month, according to Rightmove’s House Price Index.

The cut in interest rates, the first in four years, has sparked a welcome boost in buyer activity, with many lenders now offering five-year fixed mortgage rates below 4%. However, experts say that mortgage rates still have some way to come down.

Despite the dip in house prices, there is still a degree of optimism in the market, with many sellers pricing their homes competitively in anticipation of a more active autumn market.

A recent survey by SmartSave, a Chetwood Financial company, found that over two fifths (43%) of UK adults believe that their financial situation will improve in the next 12 months, with the most common reason cited being confidence in their own financial management.

The survey also found that 29% of respondents expect their salary to increase over the next year, and the same number (29%) say they will make the most of savings opportunities.

However, the survey also found that just under a quarter (24%) of respondents expect their circumstances to improve due to their confidence that the state of the UK economy is improving, while a similar figure (23%) named falling inflation as a factor.

UK house prices have seen a rare dip in recent months

The property market has seen a traditional summer slowdown in August, as the school holidays tend to mean buyers who have children put their home-moving plans on hold to enjoy holidays or time with family.

However, this also means that new sellers who do come to market at this quieter time of year may have a pressing need to sell, meaning they are likely to price more competitively.

In response to the Bank’s rate cut, Rightmove raised its 2024 forecast from a 1% drop over the whole of the year to a 1% rise in new seller asking prices.

The Bank of England’s interest rate cut has sparked a boost in buyer activity

The number of potential buyers contacting estate agents to view homes for sale is 19% higher than in the same period a year ago, according to Rightmove.

This comparison is with a very subdued period in 2023, when the market was dealing with the fallout of unexpectedly high inflation figures and peak mortgage interest rates.

However, this improvement in the buyer demand trend from 11% across the month of July shows the immediate and strong impact of the first Bank rate cut since 2020.

Agents reported that increased political certainty and the improving economic outlook is also helping with buyer interest.

Rightmove said it expects small price rises in the Autumn, followed by the usual seasonal monthly falls in prices at the end of the year.

The autumn market is expected to see small price rises

Gary Hamilton, founder of Bohome Estate Agents in Hamilton, Scotland, said: “July was a strong month for us, reflecting the resilience of our market.

We’ve seen a mix of outcomes, with some properties achieving well above the expected price whereas others sold closer to it.

This underscores how crucial it is for sellers to set realistic and competitive prices in today’s market, as getting the price right is key to attracting strong buyer interest.

With schools returning and routines normalising, we expect activity to pick up further in the coming weeks.

The stability we’ve observed in July positions us well for continued growth into the Autumn.”

Gareth Overton, head of residential sales at Henry Adams, added: “The summer property market has remained fairly active, with increased stability providing a solid foundation for continued strong sales based on buyer confidence.

The much-anticipated election outcome caused few ripples, with only a slight dip in viewings as the holiday season began.

However, as the Autumn Budget approaches, we may see more significant changes, particularly among buy-to-let landlords who are closely monitoring potential capital gains tax implications.”

Mr Overton said that in areas such as Chichester, Midhurst and Bognor Regis, the current sales market is particularly active, and he said Henry Adams has seen a noticeable increase in enquiries from downsizers across the board.

The UK property market is expected to see small price rises in the Autumn

In conclusion, the recent dip in UK house prices is a rare occurrence, and the market is expected to see small price rises in the Autumn.

Buyer activity has been boosted by the cut in interest rates, and the improving economic outlook is also helping with buyer interest.

However, sellers must still set realistic and competitive prices in today’s market, as getting the price right is key to attracting strong buyer interest.

As the Autumn Budget approaches, we may see more significant changes, particularly among buy-to-let landlords who are closely monitoring potential capital gains tax implications.

Overall, the UK property market is expected to see continued growth into the Autumn, with small price rises and increased buyer activity.

UK house prices are expected to see small rises in the Autumn