Base Rate Cut to Boost Confidence in Housing Market

The Bank of England's recent cut in the base rate from 5.25% to 5% is expected to stimulate a boost in the autumn housing market, according to property experts. This reduction will primarily benefit homeowners with tracker mortgage rates, who are predicted to see their annual payments decrease by over £340 on average. 
 
This shift marks a turning point for the base rate following multiple previous increases and offers hope for those with deals that directly track it. The change is also likely to alleviate some pressure on those currently holding one of the approximately 700,000 fixed-rate mortgage deals set to end in this year's second half, equating to roughly four thousand homeowners per day potentially facing a shock as their lower-rate deal expires. 
 
One expert described this decline as "a clear signal that the Bank believes it has turned a corner in its struggle against inflation." Others have suggested it provides crucial reassurance for borrowers who have had to navigate an unpredictable mortgage market recently. 
 
UK Finance reveals that based upon outstanding mortgage balances, an average tracker-mortgage borrower can expect their monthly payment deductions after this cut to be around £28.44. Meanwhile, individuals with standard variable rate (SVR) mortgages should anticipate their monthly payments falling by approximately £14.50 if lenders fully incorporate this reduced rate into their calculations. 
 
While Thursday's drop represents the first such decrease in over four years and signals significant progress, many borrowers have already experienced considerable increases in their mortgage costs, which far outweigh these reductions. 
 
During previous periods of rising interest rates late last year, reaching up until last summer, when they peaked at 16-year highs of 5.25%, tracker-mortgage customers witnessed an average monthly surge of nearly £557, while SVR clients were hit with typical rises upwards of circa £284 per month on average. 
 
At least six million existing homeowner mortgages, or about eighty-three percent, were fixed-rate towards last year’s end; meanwhile, trackers accounted for around six hundred forty-three thousand, and SVR deals made up approximately six hundred twenty-four thousand, according to UK Finance. 
 
Suren Thiru of ICAEW suggested that although this reduction represents a significant shift in direction, it will not significantly alter the financial realities faced by households and firms. It is just one step back from fourteen successive rate increases. 
 
Some lenders had already begun reducing their mortgage rates ahead of these changing market conditions. David Hollingworth of L&C Mortgages suggests that this much-anticipated drop could help boost consumer confidence after years of turbulence in the mortgage market. 
 
Richard Donnell at Zoopla argues that rather than signaling a substantial fall in mortgage rates, this base rate cut should instill further confidence in an already buoyant housing market. Meanwhile, Matt Smith from Rightmove advises potential home movers to consult with their banks or brokers about what they can afford, as future reductions might take some time before making any noticeable impact on buyers’ pockets. 
 
Savills forecasted house price growth over five years until 2028, totaling 21.6%, while Emily Williams expects more activity during the autumn if there are further base rate cuts soon.