Interest rates are held at 5% 

The Bank of England’s Monetary Policy Committee held the base rate at 5% at their September meeting, with 8 members voting for a hold and only 1 member voting for a cut. Now that inflation is relatively under control near the Bank’s 2% target (headline inflation was at 2.2% in July and August)¹ they have a fine line to tread between continuing to keep it low and supporting economic growth.

We’ll have to wait until 7th November for the next major interest rate decision and in the meantime, the Bank will likely form their strategy around any change to the underlying figures for wage inflation and services inflation. We’ll also be interested to see what effects, if any, the new Labour government’s upcoming Autumn Statement will have on mortgage interest rates and the wider economy.

On the topic of mortgage interest rates, lender competition is hotting up. Encouraged by slow and steady inflation and the August base rate cut, a growing number of high street lenders are continuing to drop their rates for first-time buyers, home movers and remortgagers. Last month, we brought you news of the return of sub-4% five-year fixed mortgages, for borrowers with 40% deposit or equity. Since then, some lenders have introduced sub-4% mortgages for shorter deal periods. We’ve also seen new deals enter the market available to first-time buyers with a 5% deposit. It’s worth investigating your current mortgage options and affordability, as you might be able to benefit from more favourable rates as a result of this price war.

Whether you’re buying your first home, next home or remortgaging, Moneybox Mortgages is here to help. Find the right mortgage for you from over 90 lenders and save hundreds on broker fees with our free mortgage service.

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House prices continue ticking up slowly

The latest UK House Price Index (July data released in September) was relatively uneventful – it showed that average house prices were only up by 0.6% in July compared to June. It’s the trend that’s more interesting – July brought the fifth consecutive month of annual increases and prior to that, we’d seen eight consecutive months of annual price falls.² So, while it’s not a dramatic change, it’s a sure sign that the market is now stabilising and a great indication that buyers and sellers are increasingly confident. The effect of a November rate cut would be unlikely to trickle down to the housing market by the end of the year, but it would likely give 2025 a strong start. If you’re house-hunting at the moment, you might find that you’re able to secure a discounted price, as this is traditionally a slower time of year for the market.

While the UK House Price Index runs a little delayed, as it uses Land Registry data on sold properties, we can get a more up-to-date (but less accurate) view by looking at indices from mortgage lenders and property platforms. Halifax’s August House Price Index, released in September, showed a monthly increase in house prices between July and August of 0.3%.³

Rightmove reported that asking prices for new properties advertised on their site were up 0.8% in September compared to August. Their latest House Price Index states that ‘September usually sees a monthly rise in prices, but this year’s increase is double the long-term average.’⁴

 

Mortgage approval numbers shoot up

Borrowers are clearly feeling optimistic in the current market, as we saw the level of mortgage approvals for UK home purchases jump from 61,990 in July to 64,860 in August.⁵

This marks the fourth consecutive month where approvals have increased – an encouraging sign that confidence among buyers is returning. This can likely be attributed to the more positive mortgage interest rate environment and hopes that rates will continue trending downwards as the year closes.

 

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

² Source: GOV.UK Land Registry (UK House Price Index for July 2024)

³ Source: Halifax House Price Index, August 2024

Source: Rightmove House Price Index, September 2024

Source: Trading Economics, UK Mortgage Approvals for August 2024