In an unexpected move, UK house prices rose again for the third consecutive month in November according to the Nationwide house price index.
This emerging trend bookmarks a tumultuous year for the housing market, which had previously witnessed the fastest fall in house prices since 2009.
Whilst today’s news, coupled with last week’s reduction to rates on popular mortgage deals, would ordinarily be cause for celebration amongst prospective first-time buyers – mortgage rates remain almost double what they were three years ago, prompting hesitancy among those looking to take their first steps on the property ladder.
David Hannah, Group Chairman of Cornerstone Tax, the UK’s leading property tax consultancy, comments on the need for further cuts to the base rate of interest in a bid to shore up demand in the housing market.
Nationwide’s data on the rise in house prices, indicating a short-term uptick in demand for property, was swiftly undermined by a separate report from Rightmove.
This forecast predicted that house prices are likely to fall by at least 1% next year as competition increases among sellers, reflecting a challenging year for buyers and sellers alike. Whilst interest rates have remained at 5.25% since August, the BoE’s decision to hold interest rates in late September followed 14 consecutive hikes beginning in December 2021.
Rightmove’s data indicates that the resulting rise in mortgage rates from their levels in the first two years of the 2020s continues to deter first-time buyers.
In the wake of the OBR’s announcement that the rate of inflation had fallen from 6.7% to a two-year low of 4.6%, David Hannah has urged the Monetary Policy Committee to consider further cuts to the interest rate in their next meeting on December 14th.
Asserting that a target base rate of 3-3.5% would give mortgage lenders the confidence to pursue further cuts to their offered rates and provide first-time buyers with the support necessary to escape and increasingly overheated rental sector going into the new year.
David Hannah, Group Chairman of Cornerstone Tax, said, “Market experts and analysts should hold their applause for the BoE until more data is available concerning the long-term consequences of keeping the base rate at 5.25%.
“Whilst the news that major mortgage lenders are continuing to reduce their rates, with Barclays now offering five-year fixed deals at below 4.5%, the dream of home ownership remains unattainable for many as the average monthly rate is still a far-cry from their pre-mini budget levels.
“As inflation continues to fall, the rationale for BoE to keep the base rate at 5.25% become less credible by the day. It’s my hope that the question of cutting the interest rate becomes a priority at the Monetary Policy Committee’s meeting later this month.
“A target base rate of 3-3.5% would be a desirable means of giving mortgage lenders the confidence to further slash their rates and get Britain buying again.”
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