Buyers may have some renewed confidence in the property market as mortgage rates have been cut by some major lenders.

Mortgage rates were cut by several large lenders last week. The Telegraph reported that Nationwide, TSB, and Barclays reduced rates after HSBC was the first major lender to cut rates by 0.35 points. There were also rate reductions from Coventry Building Society and Skipton Building Society.

There were cuts on fixed mortgage rates over two and five years, following inflation dropping to 7.9% in June from 8.7% in May.

Other lenders are expected to follow suit in a bid to compete for business. Swap rates – an indicator of mortgage rates – have come down slightly.

Prediction of falling interest rates

The prediction of more rates falling is despite an anticipated rise in the Bank of England’s base rate figure on Thursday. The base rate is currently standing at 5%. The Bank of England is expected to announce a small increase on 3 August, but with inflation down, further rate rises after that may not be needed.

‘The recent encouraging inflation news has led markets to re-evaluate the forecast for the coming Monetary Policy Meeting at the Bank of England,’ says MB Associates’ Sales Manager, Phil Leivesley. ‘It’s now widely anticipated that this will be a quarter-point increase rather than the previously expected 0.50% increase. This has influenced the swap rate market, giving some lenders room to make their rates more competitive.’

This is encouraging news and results in a better outlook for house prices. Although buyer demand has recently dipped, the latest HMRC Property Transactions data showed that UK residential transactions have gone up – they stood at 94,960 in June, 28% higher than in May.

Restored confidence in the property market

Transaction figures remain above pre-pandemic levels, which is hoped to bring confidence to the market. The reduced rates have helped to curb fears of a house price crash as buyers begin to return to the market.

‘It’s still early days,’ adds Phil. ‘The decreases we’ve seen thus far haven’t necessarily moved the envelope in terms of pricing. Most of the decreases have come from lenders who weren’t previously priced competitively and who are now trying to jostle for position in the market. However, it’s encouraging to see some downward movement in pricing after what seems like continual increases for the last couple of months, and hopefully, this signals the beginning of the end of rate hikes.’

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