Property Market reacts to bank of England’s interest rate decision

Posted in Jul 02 , 2024

The Bank of England has maintained the existing interest rate for the seventh time in a row. UK interest rates have not moved since the Bank of England raised them to 5.25% last August.

The decision to freeze rates again comes as inflation, which measures price rises over time, falls back to the 2% target, as revealed yesterday as well as the interest rate decision, the Bank has just released its latest forecast estimating what will happen to inflation and the UK economy.

The Bank of England governor Andrew Bailey believes that it is not yet the time to reduce interest rates. Markets are only fully pricing in a cut in September, but many economists had hoped that the Bank would make a move this month to cut rates.

One last hold in June? There is still a chance that rates could be reduced when the bank’s Monetary Policy Committee meet in August. In a sign the central bank may be getting closer to cutting rates, the BoE policy minutes said the decision had been “finely balanced”.

https://propertyindustryeye.com/property-industry-reacts-to-bank-of-englands-interest-rate-decision

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Government Policies Set to Reshape UK Property Market

The property market in the UK has seen many ups and downs in 2024 due to government policies, inflation, and the rise of interest rates. Here's a breakdown of the latest changes and how they affect homeowners, landlords, and buyers. Key Highlights: Stamp Duty Changes: Potential higher rates for investors and second-home buyers. First-Time Buyer Support: Increased relief and assistance to make homeownership more accessible. Buy-to-Let Sector Under Pressure: Tax changes and high interest rates may push more landlords out of the market. Energy Efficiency Requirements: Incentives for eco-friendly home improvements. Rising Rents: A 12% year-on-year increase in residential rents. Impact of Stamp Duty and First-Time Buyer Relief With the 2024 Autumn Budget about to be revealed, speculation about potential stamp duty changes is rising. Investors in high-value properties could face increased stamp duty, while the government may offer more relief to first-time buyers by raising the payment threshold. This would make it easier for younger buyers to enter the market, but investment properties may become less attractive due to the higher taxes. Challenges for the Buy-to-Let Market Landlords feel pressure from tax hikes and interest rate increases, with many expected to exit the market. The phasing out of mortgage interest relief has already pushed smaller landlords out, and new measures in 2024 could further limit tax reliefs on rental income. This could reduce the number of available rental properties, pushing rents even higher, as seen with the 12% rise across the UK in 2023. Energy Efficiency and Green Incentives As part of the government's broader push for greener homes, landlords who invest in energy-efficient improvements, like better insulation or solar panels, could benefit from tax incentives. Properties that meet higher energy standards will likely become more attractive to buyers, especially as energy prices remain high. Outlook for 2025 Despite concerns over high borrowing costs, property prices are expected to remain steady due to the ongoing housing shortage. However, the focus will shift toward more sustainable developments, with large institutional investors increasingly dominating the Build-to-Rent sector and ensuring the market is open for new buyers and landlords. These policies reflect the UK government's attempts to balance housing affordability, sustainability, and investment opportunities while responding to the growing demand for homes due to economic challenges.

Survey Says - Half of Landlords Looking to buy properties

Apparently almost 50% of landlords intend to purchase new BTL properties over the next 12 months, according to a BTL specialist lender’s latest survey.44% of respondents said they will be purchasing properties over the next twelve months which has significantly increased from the lender’s last survey in December last year which found only 32% intended to buy properties. Of those landlords wishing to buy properties 60% cited the main reason was to increase their portfolio, with 31% saying it was because of the increased demand from tenants; whereas in the previous survey it was 26%. There was 12% who said they were intending to buy properties because they felt house prices would be falling. Of those landlords intending to purchase more properties 40% have eleven plus properties, 42% own between four to ten properties. Small landlords with one to three properties make up18% of the landlords intending to buy properties in the next 12 months. Landlords’ confidence levels in purchasing properties differ in various parts of the country, such as a higher percentage of landlords – 28% would buy properties in the South East whereas just 13% were interested making purchases in the capital over the next twelve months. However landlords’ confidence in other areas were around the same level as the South East in the Midlands, the East of England and in the North with just under a quarter stating they intend to buy properties. The survey also found that 16% of landlords had not made any plans as to whether they would or would not purchase more properties, however this is lower than the previous survey’s findings where 25% said they were undecided. 40% said they had no intention in buying extra properties .However just under 30% stated they will be selling some of their properties over the next twelve months because of increasing concerns over variations in mortgage interest rates, landlord taxation and problems with evicting tenants. The lender’s sales and distribution director, says: “Despite the various pressures faced by landlords, there is still an appetite for further house purchases. The increase demonstrates the continued attractiveness of buy-to-let as a long-term investment strategy, which is supported by the strong demand for rental properties.” https://www.pims.co.uk/news-article/half_of_landlords_looking_to_buy/3529/

Property Market reacts to bank of England’s interest rate decision

The Bank of England has maintained the existing interest rate for the seventh time in a row. UK interest rates have not moved since the Bank of England raised them to 5.25% last August. The decision to freeze rates again comes as inflation, which measures price rises over time, falls back to the 2% target, as revealed yesterday as well as the interest rate decision, the Bank has just released its latest forecast estimating what will happen to inflation and the UK economy. The Bank of England governor Andrew Bailey believes that it is not yet the time to reduce interest rates. Markets are only fully pricing in a cut in September, but many economists had hoped that the Bank would make a move this month to cut rates. One last hold in June? There is still a chance that rates could be reduced when the bank’s Monetary Policy Committee meet in August. In a sign the central bank may be getting closer to cutting rates, the BoE policy minutes said the decision had been “finely balanced”. https://propertyindustryeye.com/property-industry-reacts-to-bank-of-englands-interest-rate-decision

What is currently happening in the UK property market

Key Facts and Figures: See our latest short listed news in the month of June 2024 the headlines are below as the average house price in UK is £281,373 and in the index stands at 147.6. a) Houseprices are predicted to fall by between -2% and -4% in 2024, given the broader economic challenges, and the likelihood that mild downward pressure on house prices continues. b) Pressure on household finances – notably from inflation and higher interest rates – has impacted housing affordability, leading to fewer completions. c) A partial recovery in market confidence and transaction volumes is expected in 2024 as interest rates ease and affordability improve. d) As with recent years, forecast uncertainty remains high given the current economic environment https://www.lloydsbankinggroup.com/media/press-releases/2023/halifax-2023/uk-housing-market-review-outlook-2024.html e) The average UK house price is now £283,615 compared to £286,328 a year ago, a fall of £2,713. f) Annual house price growth is -1.0% (year to November). During 2023 it was as high as +2.1% (January and February) and as low as -4.5% (August and September). g) Average property prices are £44,439 (+18.6%) higher than at the onset of the pandemic (£239,176 in March 2020). Property prices for homes bought by first-time buyers recorded slight growth (+0.5%) over the last year, while the amount paid by home-movers fell by -1.7%.

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