This illustration of just how powerfully a base rate decrease can impact market sentiment bodes well for the industry, of course, following the Bank of England’s base rate reduction from 5.25% to 5.0% at the start of August.
Even a hold on the base rate can help improve market stability, it seems. Octane Capital found the number of mortgage approvals per month rose from 44,424 in September 2023, when the rate was first held at 5.25%, to over 60,000 in February of this year. It has largely remained at this level ever since.
“Now that the base rate is starting to reduce, we expect this pressure to uncoil at pace which should drive further house price growth over the remainder of the year,” noted Jonathan Samuels, CEO of Octane Capital.
What impact does a base rate cut have on consumer confidence?
Responding to the findings, Peter Brodnicki, chief executive of Mortgage Advice Bureau said it is increasingly more difficult to pull on historic trends to predict the pace of a housing recovery – and clearly the affordability impact has not disappeared just because we have seen the first of several predicted base rate cuts.
“Having said that, I am a firm believer that you typically regain the housing transactions lost in a downturn as clearly pent-up demand builds and at some point starts to be released,” said Brodnicki (pictured left). ”Buyers able to purchase but waiting for further interest rate cuts, risk paying more for their property as prices start to edge up which they are already doing.”
