New data from the Bank of England (BoE) reveals that the average UK mortgage rate fell for the first time in two years.

According to the report, the ‘effective rate of interest paid on newly drawn mortgages fell by a six-point basis, from 5.34 per cent in November to 5.28 per cent in December – the first drop since November 2021.

During this same period, mortgage approvals rose to a six-month high following two months of consecutive increases as prospective buyers took advantage of the ongoing price war between the UK’s leading lenders.

According to David Hannah, Group Chairman of Cornerstone Tax, the nation’s leading property tax advisory, the BoE ought to look towards continuing the current wave of optimism within the UK’s housing market at their next few meetings through a reassessment of the current interest rate regime.

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In light of the BoE’s news, data from Nationwide reported that house prices rose 0.7 per cent month-on-month in January, beating forecasts as affordability eased for buyers.

According to a Senior Economist at Capital Economics, this gain reflects an improved public sentiment about the housing market and economy at larger.

Since the BoE’s decision to hold interest rates at 5.25 per cent in September’s Monetary Policy Committee meeting, mortgage rates among the UK’s top lenders have fallen rapidly following their peak in the first half of 2023, with HSBC becoming the first major lender this year to introduce mortgage products at a rate of less than 4% – with the cost of a five-year fixed coming in at 3.94%.

According to David Hannah, the BoE ought to be looking towards the future of the UK’s housing market at their next meeting.

Whilst experts are predicting that the MPC will vote to keep interest rates at their current level at 5.25 per cent, the latest report from the British Retail Consortium revealed that UK shop price inflation increased at its slowest pace in almost two years, offsetting the rise in tobacco and alcohol prices that reinforced last month’s CPI increase.

David Hannah, Group Chairman of Cornerstone Tax, said, “It should come as welcome news to prospective buyers across the country that mortgage rates are finally starting to demonstrate a noticeable fall, we should expect to see a continued flurry of activity within the property market in the coming months as further opportunities crop up amidst the ongoing mortgage price war.

“However, the BoE must prioritise the future of the housing market, preserving the current wave of momentum that’s only now just being felt amongst those looking to take their first steps on the housing ladder.

“With inflation set to continue its downward trajectory in the following months, it’s imperative for the monetary policy committee to reassess the current interest rate regime in order to stave off recession fears”