The Bank of England base rate has a big impact on mortgages, so the recent reduction could make it easier for homebuyers to climb the property ladder.
For the first time in four years, the base rate was reduced by 0.5 per cent, taking it to five per cent.
It was originally raised from 0.1 per cent in November 2021 in a bid to control inflation, and has been stuck at 5.25 per cent for the last 11 months.
The uncertainty of the base rate in recent years has caused mortgage rates to rise, particularly for the more secure five-year fixed-rate products. These fluctuated between four and six per cent, making mortgages too costly for lots of purchasers.
Therefore, the recent drop in the base rate could result in mortgage rates becoming more affordable, so long as the financial market remains stable.
At the same time, Zoopla recognises that many buyers are getting used to the higher mortgage rates, particularly as wages have increased and house prices have either plateaued or declined in the last few years.
Indeed, according to the most recent Halifax House Price Index, property values have only risen by 1.6 per cent over the last year, following several months of falling prices in 2023.
Buyers are now paying 97 per cent of the asking price, which is higher than in the last year and a half. What’s more, ten per cent more homeowners are expected to move in 2024 compared with last year.
This shows that the property market has still survived despite high mortgage rates, and the recent drop in the base rate could boost the industry even more, encouraging homebuyers and sellers to ask their local estate agents to help with their moving journey.
