Latest Property News | Warwick Estate Agents

Details: Published: 12 November 2024; Hits: 795

The Bank of England’s recent rate cut is a welcome move and one that was needed given the economic performance this year. With inflation now below the 2% target and a new government working to build positive momentum heading into 2025, things are looking up.

Property investors are likely to be encouraged by the rate drop, and we’re already seeing renewed interest post-election. This is expected to keep growing, especially with the stability the new government brings for the next 4-5 years—there’s a lot of confidence in the market right now.

That said, we probably won’t see any huge financial shifts. Lenders have already factored in the expected rate drops, but this move from the Bank of England signals their readiness to start lowering rates. We can likely expect further cuts in early 2025.

Still, this rate cut might be a bit of a double-edged sword for property investors.

On one hand, lower interest rates make borrowing cheaper, which should help buyers and those refinancing. Even a small dip in mortgage rates could open up opportunities for investors who’ve been sitting on the sidelines. On the other hand, there might be a slowdown in rate cuts from here, as inflation is still a concern. The Bank has made it clear that it will be watching inflation closely, especially with the extra fiscal stimulus from the recent Budget. This means we might not see the big drops in rates that many investors are hoping for.

However, let’s not forget that the Bank of England’s rate cuts don’t instantly translate to cheaper mortgages, especially for those on fixed rates. People who locked in rates a couple of years ago when they were higher might not see any relief just yet. That said, tracker mortgages and people looking to secure new loans could benefit from this. The property market may also start to see more activity as people adjust to the slightly lower rates, which could stabilise property prices in some regions.

I think it’s also crucial to point out that despite the rate cut, the mortgage market isn’t operating in a vacuum. Lenders are still being cautious, and the volatility we’ve seen in the wake of the mini-budget last year has made banks more selective. Yes, there might be some immediate relief for tracker mortgage holders, but for anyone hoping for drastic changes to fixed-rate deals, it’s going to take time. If the government continues to boost public spending, as we saw with the recent budget, this could ultimately keep inflation slightly elevated, which might mean that rates stay sticky longer than expected.

As we’ve seen, when inflation rises even slightly, it can have an outsized impact on construction costs. For developers, it’s about more than just interest rates. Higher costs for materials and labour, driven by inflation, could mean more expensive new builds and less margin for error. Lower rates might stimulate demand, but if costs keep rising, those price increases could get passed down to buyers, potentially hurting affordability. It’s something we’ll have to keep an eye on.

With all that in mind, property investors should stay cautious but optimistic. The key is to remain flexible. If you’re in a position to buy, look for opportunities in areas where demand remains strong despite potential inflationary pressures. There may be more opportunities in smaller markets where price growth isn’t as volatile. For those holding onto properties, it’s also worth considering refinancing, if you’re coming to the end of a fixed-rate term.

I’d also add that we need to consider the long-term trajectory.

This rate cut isn’t likely to be the end of the story. While the Bank has signalled gradual future cuts, it’s clear they’re mindful of inflation. As such, property investors need to plan for a market where rates are not going to fall dramatically anytime soon. That means thinking strategically about both debt and asset allocation. Diversifying portfolios could be key.

Details: Published: 12 November 2024; Hits: 799

The decisive nature of the result calmed concerns about civil unrest and the possibility of a volatile reaction on financial markets, where the response was largely predictable.

In the longer-term, it doesn’t change the fact the US has a ballooning deficit or that some of Trump’s plans are inflationary, including the imposition of tariffs, reduced reliance on cheaper imported labour and lower taxes.

As a result, his victory put upwards pressure on US Treasury yields last Wednesday in the belief the Federal Reserve will need to respond with rates that stay higher for longer. Irrespective of the election result, the Fed made a long-expected cut to a range of between 4.5% and 4.75% last week. The Bank of England cut to 4.75% on the same day, although the pace of reductions is expected to slow following the Budget.

Trump’s victory will do nothing to calm nerves about the prospect of higher mortgage rates in the UK, although markets this side of the Atlantic are still focussed on digesting the Budget.

Bond markets have not given it a wholehearted thumbs-up and last week saw the weakest take-up for the sale of UK debt since December 2023.

In the longer term, more money could be invested in UK debt markets if the country starts to look attractive by comparison to the US, which would put downwards pressure on bond yields and mortgage rates, said Savvas Savouri, chief economist at Quantmetriks.

The UK “cannot fail to see a greater share coming into its financial (gilts, equities) and physical (read real estate) assets,” he said.

However, there are various forces pulling in different directions. There is uncertainty over whether the Labour plan to raise taxes in the private sector more aggressively will work, creating nervousness around how much more it may need to borrow.

The five-year interest swap rate was trading above 4.3% last Thursday compared to under 3.9% at the start of October and there are concerns it could go higher if the government’s borrowing headroom narrows.

The interest rate landscape is certainly more adverse than a fortnight ago, which will increase downwards pressure on house prices in the short-term.

For anyone deciding whether to fix their mortgage rate for two or five years, they will be weighing up whether they think the Budget will work or more rate turbulence lies ahead during this Parliament.

That said, when judging what will happen to prices and demand, it should also be remembered that the majority of UK homeowners own their home outright rather than with a mortgage, meaning there is no shortage of cash in the system, particularly in prime London postcodes.

The US election may also provide opportunities, particularly in prime UK residential markets.

In addition to having a high deficit, Trump said he wants a weaker dollar to make the US more competitive. That would mean plans may accelerate as the window of opportunity for overseas buyers looking to take advantage of the weak pound since the Brexit referendum in 2016 may start closing.

Beyond that, a number of Democrats and high-profile individuals may decide to move to the UK and live under a government more aligned with their political views. After all, the party raised more than a billion dollars during the election campaign, which was three times higher than the Republicans.

Meanwhile, tensions in the Middle East may heighten following Trump’s victory, meaning a number of buyers from the Gulf may start looking more actively at London and the surrounding areas.

Details: Published: 08 November 2024; Hits: 836

The nine-member Monetary Policy Committee (MPC) voted in favour of the reduction, following a steady trend in economic forecasts that suggest a potential downturn in inflationary pressures.

The rate cut comes despite new fiscal policies introduced in Chancellor Rachel Reeves’s recent budget, which are expected to increase costs for UK businesses, including a 1.2% rise in employers’ National Insurance contributions from April. Stuart Douglas, Director of Capital Markets at Centrus, noted, “Though the interest rate cut was expected, concerns linger about inflationary pressures stemming from both fiscal policy changes and the impact of Donald Trump’s US election victory on global trade.”

Trump’s proposed tariffs on imports have sparked fears of a trade war that could lead to higher costs for UK businesses and consumers, impacting both inflation and growth. Economists at the National Institute of Economic and Social Research warned that these factors might prompt the Bank of England to ease policy more cautiously.

At the Bank’s last meeting in September, MPC members took a cautious stance, keeping rates unchanged as some members, including Chief Economist Huw Pill, voiced concerns over high services inflation and wage growth. With regular wage growth at its weakest in two years, now down to 4.9%, and headline inflation dropping from 2.2% in August to 1.7% in September, the Bank’s decision to lower rates reflects shifting economic conditions.

Catherine Mann, an external MPC member known for favouring restrictive monetary policy, maintained her caution, arguing that tight policy remains necessary to curb inflationary behaviours. However, Bank of England Governor Andrew Bailey suggested the possibility of a “more aggressive” loosening cycle, balancing the need for caution with the benefits of rate cuts in a slowing economy.

Market data has reflected some of the budget’s pressures, as yields on UK government bonds rose by 25 basis points after the budget announcement—a significant increase excluding the aftermath of the 2022 mini-budget. Meanwhile, analysts at Nomura observed that easing inflation and slower wage growth allow the Bank more scope for rate cuts, projecting further reductions in the coming year.

Goldman Sachs forecasts that UK interest rates could fall to 3% by September 2025, though uncertainties remain. The rate cut has been met with cautious optimism among UK businesses. Mike Randall, CEO of Simply Asset Finance, commented that while the cut offers some relief, further support is essential to meet growth targets outlined in the Chancellor’s Autumn Statement.

“SMEs need greater certainty and more incentives to invest in long-term growth,” Randall said. “With this, the Government’s goal of rebuilding Britain can be realised.”

The latest cut aims to support a UK economy facing complex pressures from both domestic fiscal policies and international trade uncertainties, setting the stage for further potential adjustments as the Bank monitors the evolving economic landscape.

Paul Jones

Harvard alumni and former New York Times journalist. Editor of Business Matters for over 15 years, the UKs largest business magazine. I am also head of Capital Business Media's automotive division working for clients such as Red Bull Racing, Honda, Aston Martin and Infiniti.

Details: Published: 06 November 2024; Hits: 921

The Bank of England will almost certainly cut interest rates tomorrow in what would be a welcome move for property buyers and sellers, as well as estate agents.

A slowdown in business activity in October revealed in yesterday’s final S&P Global UK Composite PMI survey suggested a degree of uncertainty ahead of the budget. The index fell from 52.5 to 51.8, its lowest reading since November last year. But economists still expect interest rates to be cut by 0.25%, from 5% to 4.75%, when the Bank’s Monetary Policy Committee (MPC) meet tomorrow.

Paul Heywood, chief data and analytics officer at credit agency Equifax UK, said: “With inflation below target, a further base rate cut remains the most likely scenario, but consumer affordability pressures won’t disappear overnight and could yet persist for longer.

“The volume of mortgage originations on loan terms of more than 35 years remains over twice as high as two years ago, as consumers trade off a bigger long-term bill for the short-term relief of smaller monthly repayments.

“That’s before considering the changes to Stamp Duty relief for first-time buyers, or any fresh inflationary impact from government spending plans.”

Joel Kruger, market strategist, at foreign exchange and crypto trading specialists LMAX Group, commented: “We believe the balance of risk is supportive of the pound heading into this week’s Bank of England policy decision where the central bank is widely expected to cut rates by 25 basis points.”

UK estate agents have reported more buyer interest since summer following the BoE rate cut in August, with buyer enquiries increasing significantly in recent weeks.

The Bank cut interest rates from 5.25% to 5% in August, which was the first drop in more than four years.

UK inflation fell to 1.7% in the year to September, the lowest rate since April 2021.

The drop in the rate was larger than expected thanks in part to lower airfares and petrol prices – economists had predicted a 1.9% fall.

It also means inflation is now below the Bank of England’s 2% target, paving the way for interest rates to be cut further next week.

Financial markets have been pricing in a interest rate cut for the UK at the next Bank of England tomorrow, with all 72 economist in a Reuters poll taken 22-28 October forecasting that BoE will cut its Bank Rate by a quarter-point next week to 4.75%.

But while the Bank is facing growing pressure to also cut interest rates in December as wage growth slows, almost near-two-thirds of respondents expect no interest rate move in December, suggesting the BoE will stick to a cautious approach.

Among 16 gilt-edged market makers, a majority of 11 expected the MPC to hold rates in December, while five expected a cut. Interest rate futures are pricing in reductions in both November and December.