The Bank of England provided a boost to the UK property market by cutting its base interest rate from 5% to 4.75%. This reduction is welcome news for both homebuyers and property investors and could lead to cheaper borrowing costs for mortgages. This move could stimulate renewed interest in the housing market, encouraging both first-time buyers and seasoned investors to consider new opportunities in the UK.
Bank of England governor Andrew Bailey offered reassurance, saying it was "likely that interest rates will continue to fall gradually from here".
Against this backdrop of positive news, the average UK house price reached a record high last month, according to Halifax, the UK's largest mortgage lender. Halifax reported that the average property price rose to £293,999 in October, surpassing the previous peak of £293,507 set in June 2022.
In October, house prices edged up by 0.2%, marking the fourth consecutive month of increases. House prices are now 3.9% higher than a year ago, though this is a slight decrease from the 4.6% annual increase recorded in September.
While Halifax expects house prices to rise at a "modest pace" over the coming months, it has cautioned that mortgage costs may remain "higher for longer" due to economic pressures stemming from last week’s Budget. The Budget included significant borrowing and spending plans, which initially raised concerns that the Bank of England might cut rates more gradually. However, the recent rate cut has brightened the outlook for buyers and investors who may have been waiting for more affordable financing options.
Commenting on the new record high, Amanda Bryden, head of mortgages at Halifax, said: “That house prices have reached these heights again in the current economic climate may come as a surprise to many, but perhaps more noteworthy is that they didn’t fall very far in the first place. Despite the headwind of higher interest rates, house prices have mostly levelled off over the past two and a half years, recording a +0.2% increase overall.”
Bryden noted that recent Budget announcements—such as higher stamp duty for second-home buyers and a return to previous thresholds for first-time buyers—might dampen demand for properties. However, she also observed that activity in the property market has been improving, with the number of new mortgage approvals hitting a two-year high recently.
