Samantha GadesIwona Hovenko, Senior Real Estate Analyst at Bloomberg Intelligence, comments on the finding of BI’s latest Housing Pulse report that UK housing activity may climb as chunky declines in mortgage rates follow the first Bank of England policy cut.
UK housing activity may improve further in coming months, supporting sales at UK homebuilders including Barratt, Persimmon, Taylor Wimpey, Bellway and Berkeley, based on housing benchmarks. Developers’ reservations have risen vs. 2023, and may continue to recover as mortgage rates retreat from mid-2023 highs. UK house prices could also remain on a steady, if modest, upward trajectory, especially given the usual slowdown in the run-up to Christmas. The latest readings of Rightmove, Halifax and ONS indexes are only marginally off peaks, while Nationwide’s benchmark is still about 3% below its record high. Zoopla’s gauge flags a relatively static year-over-year out-turn, but 1.4% year-to-date growth. All benchmarks continue to point to some outperformance in the more affordable north of the UK vs. south, as high costs bite.
Market expectations point to accelerated rate cuts vs. just three months ago, with the BOE benchmark seen falling to 3.5% in mid-2025, compared to a much smaller reduction to just 4.6% seen in June.
Further easing by the Bank of England is expected to follow its August 25-bp cut, and lenders are front-running mortgage-rate reductions to win market share amid subdued demand. That could boost the so-far muted recovery in housing activity. Lower rates, alongside improving affordability as real income growth outpaces house-price rises, have been a key missing piece needed to revive activity. Yet a material revival in activity may hinge on further reductions. In September, the lowest 5-year fixed-mortgage rate for a house purchase at a 60% loan-to-value dropped to 3.77% vs. about 4.5% earlier this year. Yet deals for less-discretionary remortgaging on equivalent terms were 10-15 bps more expensive. BI analysis suggests rates near 4% are manageable for borrowers remortgaging due to rising wages.
Market expectations point to accelerated rate cuts vs. just three months ago, with the BOE benchmark seen falling to 3.5% in mid-2025, compared to a much smaller reduction to just 4.6% seen in June. Yet after that, much more limited declines are anticipated, with Bank rate possibly falling only another 20 bps by mid-2027, based on current market views. Faster than previously expected BOE rate cuts could also support a recovery at homebuilders like Barratt, Taylor Wimpey, Persimmon and Bellway, whose sales and prices were hit by high mortgage rates and buyers’ squeezed budgets amid a spike in the cost of living.”
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