August looks set to be the month that the Bank of England cuts interest rates.
The Bank’s Monetary Policy Committee held firm and maintained interest rates at 5.25% at their June meeting, despite the inflation rate falling to its target rate of 2% for the first time in three years.
Committee members voted 7 votes to 2 to keep the rate the same for the seventh time in a row but many commentators believe they were unlikely to announce a drop while the election campaign was underway. The Bank is independent of government and needs to be seen as politically neutral.
The two dissenting votes recommended a cut of 0.25% but, in the end the committee agreed that monetary policy should remain restrictive for longer until the risk of inflation becoming embedded above 2% dissipates.
But with inflation coming under control, calls for a rate cut in August are likely to become louder and this can only be of benefit to a property market simmering with pent-up demand.
Iain McKenzie, CEO of the Guild of Property Professionals, said: “Although buyers and sellers will have to wait a little longer to see an interest rate cut, the property market continues to see steady recovery as buyer demand, transaction levels and prices show growth.
Increasingly brighter
“When it does happen, a rate cut will bring mortgages down, providing much-needed relief while boosting market confidence further.”
The end of the election campaign is likely to give a further nudge to buyers because it will signal an end to uncertainty.
Data from Compare My Move looked at the last seven elections and suggests that house prices tend to rise in the 12 months following an election by 4.6%. On average house prices go up 1.1% more under a Labour government than under the Tories.
But price rises are ultimately dependent on the strength of the economy and news on that front has been increasingly brighter in recent months.
According to data from the Office of National Statistics, average house prices rose 1.1% in the year to April 2024 – up from the 0.9% increase reported in March.
According to Rightmove, over the last four weeks the number of sales agreed remains at 6% higher than the same time last year and buyer demand is 5% higher.We can expect to see those numbers rise when a cut in mortgage rates motivates more buyers to enter the market.
With the future for interest movements looking to be down, now is the perfect time to make that property move and take advantage of the market before this happens and we potentially start to see property prices rise.
Get the process started with a free instant online valuation of your property by clicking here.
