No change to base rate as inflation hits target

June brought the welcome news that inflation slowed from 2.3% in April and hit the Bank of England’s 2% target in March. Despite this, the Bank of England voted to hold the base rate of interest at 5.25% at their June meeting, for the seventh time in a row.¹

Many borrowers would have been hoping that rates would be cut, but we’re not out of the woods just yet. Service inflation and wage growth are still higher than the Bank would like them to be before they have the confidence to start cutting interest rates. Plus, an immediate rate cut could be seen as political ahead of July’s general election. Market analysts are currently split 50/50 on the first interest cut landing on 1st August, at the Bank’s next meeting.

Lenders have started reducing their own mortgage interest rates in anticipation, with Barclays leading the way and other lenders signalling that they’ll follow suit. If you’re looking to buy or remortgage, consider taking advantage of lender competition over the next few weeks. Brokers at Moneybox Mortgages compare thousands of deals from 90 lenders across the market, updated daily. We can help find the right one for you – tap below to start your mortgage search.

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Housing market enjoys a steady summer

The housing market has been relatively stable too. Rightmove reported that asking prices remained flat in June, following record highs in May and ‘following the same seasonal pattern as recent years’. There was a 0.6% month-on-month increase, which is not much to write home about compared to monthly increases of recent years.² There’s been a slight drop in the number of new sellers listing properties, especially at the more expensive end of the market, which could signal that these sellers are more cautious in waiting to see how the election unfolds.

The UK House Price Index, which tracks Land Registry data from sold properties and is therefore generally more accurate, is trending in a similar direction. The latest data in April showed that house prices were up 1.1% annually and had only increased by 0.3% compared to March.³ 

For buyers, affordability remains the challenge, but with wage growth currently outpacing house price increases and mortgage rates beginning to come down slightly, we hope to see this improve. So, whether you’re looking to buy your first or next home, it’s worth weighing up whether this could be a good time for you!

 

Mortgage approvals dip slightly

The number of mortgage deals approved for house purchases missed the forecasts for the second month in a row, falling from 61,140 in April to 59,990 in May.⁴ Pre-pandemic, the ‘normal’ level of mortgage approvals was around 66,000 per month. This dip reflects the reality of the current market – home-buyers are still slightly hesitant to make a move while mortgage rates remain relatively high. Hopefully, with inflation now under control and interest rate cuts more firmly in view, the tide will turn again.

 

¹ Source: Office of National Statistics (ONS) CPI Annual Rate of Inflation

² Source: Rightmove House Price Index, June 2024

³ Source: GOV.UK Land Registry (UK House Price Index for April 2024)

⁴ Source: Trading Economics, UK Mortgage Approvals for May 2024