What the Interest Rate Decision Means for the Property Market

The Bank of England has just announced its decision on interest rates.

And the decision is… to keep the interest rate on hold at 5% for now.

In this post, we’ll look at what the interest rate decision might mean for the property market over the rest of 2024.

First, in case you don’t know – and let’s be honest, most of us don’t – here’s a quick heads-up on how the interest rate is set.

The interest rate isn’t set with you, the house buyer or seller, in mind.

In many ways, it’s all a bit random.

In simple terms, the Bank of England’s Monetary Policy Committee, which is made up of nine experts including the Governor, sit around and discuss the economic situation at the moment. They discuss things like inflation, wage growth and the progress of the UK and world economy.

Their brief from the government is to try to keep inflation to 2% or less.

Then, the committee makes a decision on whether to change the interest rate or not. And they do it in much the same way as a local parish council might when deciding whether to install a new park bench. They take a vote and the majority vote decides.

So, what might the decision to keep the interest rate on hold mean for the property market?

It will mean the cost of a mortgage will stay about the same, at least for now.

Remember, it’s not that simple, though. The Bank of England interest rate isn’t the same as the mortgage rate you pay. Most people today are on fixed mortgage rates, so their rates don’t change until the end of their term. Lenders often try to anticipate rate changes and so, for example, might reduce (or raise) their actual borrowing rates in advance of the interest rate going down (or up).

Another factor is that most home buyers don’t decide whether to buy or move (or not) based on the interest rate as such. They do it based on their personal circumstances, and whether they can afford it or not based on the actual monthly cost of their mortgage.

There are other factors at play that affect the property market as much, if not more, than the interest rate. Like the cost of living. The cost of living may not be rising as much as it was but it isn’t going down. And the level of taxes. Many experts are predicting some of these will rise in the Budget.

And it’s worth remembering that people don’t always base their decision to buy or sell on hard facts and figures. Some people decide to move house just because, well, they want to. (And why not?)

So, at the end of the day, today’s decision to keep interest rates on hold probably won’t make much difference to the market. People who really want to buy a property will still buy.

If you are thinking of buying a property at the moment, what should you do?

Don’t be guided too much by today’s interest rate decision. Look at your own personal situation, your budget and whether you can afford it.

As always, a good estate agent can tell you about what they have available within your budget in the area in which you’d like to buy.

If you are thinking of selling right now, what should you do?

September is usually a good time for the market, with many buyers looking to get a deal done before Christmas. And regardless of the interest rate, there are always buyers out there for properties that are properly priced.

A good estate agent can tell you what they think is the right asking price for your property, and help you to find the right buyer.

Looking ahead, the next Bank of England interest rate decisions are on 7 November and 19 December. Many experts have been predicting that there will be at least one more interest rate cut this year. So one of those could be the date it happens.

But nothing is for certain. As of now, it’s very difficult to predict where the interest rate might go later in 2024. Watch this space for more information as we have it.