Interest rates remain frozen – what does it mean for agent activity?

Interest rates were held for the fifth consecutive time after the latest Bank of England Monetary Policy Committee (MPC) meeting yesterday.

The cost of borrowing has now remained at 5.25% since August 2023, raising hopes that the central bank is edging closer to rate cuts, which are expected towards the end of the summer.

Guy Gittins, chief executive of Foxtons, said: “Homebuyers have been waiting patiently for an interest rate reduction and while it is largely expected to come this year, it seems as though they will have to wait a little longer still. The positive to take is that an air of stability has returned to the UK property market since rates were held at 5.25% last September and this has helped revitalise buyer activity levels in recent months. 

“In fact, it’s fair to say that the market has picked up the pace considerably and not only have we seen a 23% increase in sales enquiries versus this time last year, but there’s also been a 19% increase in viewings activity and we reported on 5 March 2024 that we’d seen a 31% increase in the number of offers being accepted. 

“The higher cost of borrowing certainly remains an obstacle for many buyers, but there continues to be an abundance of opportunity for those who can secure a mortgage.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said the pressure is building for a cut sooner rather than later.

He added: "The inflation figure always helps set the trajectory for rates and its present level, with the prospect of further drops, will probably force the Bank’s hand at some point.

"Further falls in the pace of wage growth in particular will contribute to the decision making but we have already noticed mortgage payments at least are beginning to fall again as they are not bound by the same constraints and are certainly helping to build confidence in the housing market to take on debt.”

Matt Smith, Rightmove’s mortgage expert, said: "Although this isn't the day for the first base rate cut, each day that passes is one step closer, and it's very much a 'when' rather than 'if' we see the first drop from 5.25%.

"Mortgage rates have risen slightly over the past six weeks but it does feel like the pressure on lenders to increase rates has dissipated, with some lenders having already cut rates in response to yesterday's positive inflation news. This may mean that average mortgage rates start to fall back in the next couple of weeks. If this is the case it will be first time average rates will have reduced in over a month.

"Homemovers shouldn't expect to see a rush of rate cuts, but the two announcements this week should hopefully continue to give movers more confidence than they perhaps had at the start of last year. That's certainly been the theme so far after the first quarter of the year - with more people enquiring to purchase homes, more sellers come to market and more sales being agreed than this time last year."