The Bank of England has cut interest rates to 4.25% from 4.5% in a boost to landlord borrowing.
The cut is the fourth rate reduction from last year’s peak of 5.25%, and the second this year. The Bank’s Monetary Policy Committee, headed up by Andrew Bailey (main image) explained that monetary policy would need to remain restrictive until the risks to inflation returning sustainably to the 2% target had further reduced.
Emily Williams, director of research at Savills, believes the latest rate cut should give buyers confidence that mortgage affordability will continue to improve, despite the recent global trade uncertainties. “It looks like we are in for at least another two rate cuts this year, which should gradually widen the pool of buyers and increase their buying power,” she adds. “Additionally, we are seeing some lenders ease the affordability tests they put borrowers through, on the back of revised guidance from the Bank of England.
“This could support a more stable recovery in the medium term, though weak consumer sentiment is likely to keep market conditions subdued for now.”
It comes as new figures show sustained confidence in the UK’s housing market, with house prices up by 0.3% in April, putting the price of an average property at £297,781. According to the latest Halifax price index, the annual rate of growth was up 3.2%, from 2.9% in March.
Northern Ireland continues to post the highest level of annual property price inflation, rising by 8.1%, while Wales has the next fastest pace of annual house price growth, increasing to 4.7% last month.
Halifax reports that despite a surge in transactions prompted by the stamp duty changes, this didn’t lead to a significant increase in property prices, with the last six months characterised by a stability in prices rarely seen since the pandemic.
“Mortgage rates have continued to fall, with most lenders now offering rates below 4%. Coupled with positive earnings growth that has outpaced broader inflation, these factors have helped to steadily improve affordability for many buyers,” according to Amanda Bryden, head of mortgages.
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