Rates cut signal bright summer for Resi market

The Bank of England's announcement of a 25-basis point cut in interest rates, lowering the base rate to 4.25%, is expected to invigorate the housing market by reducing borrowing costs and making mortgages more accessible for prospective buyers. The rate cut comes at a time when inflation has eased to 2.6% potentially signalling the beginning of the end of the cost-of-living crisis. These developments promise a bustling summer for estate agents and conveyancers.  

The UK residential property market has demonstrated remarkable resilience and growth, even amidst global economic uncertainties. The decline in interest rates and the availability of competitive mortgage options are expected to further bolster its positive trajectory. 

Last winter, there were concerns about the SDLT deadline creating a cliff-edge effect. It was thought that the surge of instructions in January would cause the market to run out of steam. Those who missed the deadline might be discouraged from continuing. Additionally, high living costs, interest rates, and mortgage rates were expected to dampen buyer interest further, while the SDLT increases for second homes would deter investors. Yet as the weather improves, the market does likewise. 

For a long time, a shortage of available properties has driven up prices, at time even causing buyers to queue for viewings. Affordability issues and the high cost of living have deterred many from purchasing homes. However, RightMove now reports a 4% increase in new sellers entering the market, alongside a 5% rise in buyer demand. This indicates that while property prices continue to rise, they are doing so more gradually and in line with salary increases. 

While it is tempting to view the current situation as entirely positive and believe we can finally leave the post-pandemic uncertainty behind, there are still areas of concern. Leasehold property owners, particularly those in high-risk buildings with safety defects, continue to face significant challenges in property transactions. 

Several legislative measures, such as the Levelling-up and Regeneration Act 2023 and the Leasehold and Freehold Reform Act 2024, are yet to be fully implemented. Additionally, the proposed Leasehold and Commonhold Reform legislation is still in the drafting stage. The Building Safety Act 2022 also remains a source of ongoing issues, preventing many property owners from moving forward. 

Renters and landlords may feel disadvantaged. The Renters’ Rights Bill is nearing the end of its parliamentary journey and is likely to be passed within the next month, although the timeline for its provisions to come into force remains uncertain. This Bill represents the most significant change in tenancy legislation since the late 1980s and will substantially alter the landlord-tenant relationship. From headline-grabbing changes, such as the removal of no-fault evictions, to more complex adjustments like converting all tenancies to periodic monthly tenancies with no fixed periods, both landlords and tenants are likely to feel the impact. 

For landlords, especially those with only a few properties or operating on a small scale, the proposals and the risk of not recovering possession may prompt them to consider exiting the market. While this could increase the number of properties available for purchase, renters may face a shrinking pool of available rental properties and, consequently, rising rents. 

Additionally, domestic economic policies from the Autumn Budget are still taking effect. Although the Chancellor may be pleased with calming inflation and steadily lowering interest rates, the true impact of decisions such as the increase in National Insurance contributions on employment cannot yet be fully assessed. The global economy remains unstable. Tariffs, recession, and war do not create a favourable property market, and some of the growth sought by the Government may not materialize as investors wait to see how geopolitical and economic factors unfold over the next six to twelve months. 

In conclusion, the market is in a good place, and long may it continue, but in a world of increasing uncertainty perhaps, like the weather, we should just enjoy it while it lasts.