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15 Dec, 2023

Held Interest Rates Bring Confidence to Housing Market Lenders

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    Interest Rates Held at 5.25%: What Does This Mean for UK Housing?

    For the third month, the Bank of England Base Rate has stayed at 5.25%, meaning borrowing rates will remain at their highest peak for 15 years.

    However, mortgage lenders are already lowering their rates, finding renewed confidence in a stabilising UK property market.

    We’ll look at what this means for the buy-to-let sector and what we can expect moving forward into 2024.

    Also, if you’re interested in property investment, feel free to check out more of our helpful articles, including ‘Is Investing in Property a Good Idea’ or our guide on the best London rental yields.

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    The MPC Votes 6-3 to Keep Inflation at the Same Level

    According to the BBC, the Monetary Policy Committee voted 6-3 to keep interest rates at their current level. The three dissenting voters wanted to raise rates to 5.5% to combat inflation.

    However, the most recent inflation rates are 4.6%, falling from 6.7% in November, meaning the Bank of England has succeeded in halving inflation in 2023. However, there is still a long way to go in reaching the 2% goal.

    This is a pivotal moment in the battle to lower inflation. Yet, earlier in the day, there was talk from some forecasters that the Bank of England would need to lower interest rates in the next year to 4.25% to combat a recession.

    The official stance from the Bank of England is that their policy remains the same – expect high-interest rates for the foreseeable future.

    Speaking to the media, Governor of the Bank of England Andrew Bailey said it was “too soon” to cut interest rates. He also added that we were making “good progress” and that there were encouraging signs despite having more to do to hit the ultimate 2% target. He also said the interest rate hikes had unwound many of the shocks in the country’s economy over the last three years.

    The MPC will meet again on February 6, 2024.

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    What Do Interest Rates Mean for the UK Housing Market?

    Due to higher interest rates, homebuyers have faced substantial mortgage rates over the last year.

    However, as inflation has come down and interest rates have stayed the same throughout Q4, mortgage lenders have regained their confidence in the property market. The likes of Virgin Money and HSBC reduced their fixed deal rates this week. TSB followed suit soon after as well.

    For new buy-to-let investors, these figures mean they can get better rates than they have been able to all year.

    This should promote more buyer activity as we head into 2024. Currently, asking prices are down as sellers try to get deals through. Rightmove reported that asking prices were down by £7,000 in December.

    While buyer activity will increase over the next few months, the market will remain subdued. However, this also means that tenant demand for homes in the privately rented sector should continue along its current trajectory, driving up rents.

    Forecasters expect property prices to drop further in 2024 for buy-to-let homes for sale before increasing in 2025. With a predicted rental growth of 6%, according to Savills’ latest property forecast, buy-to-let investors stand to enjoy significant gross yields over the next year.

    Once again, the property market proves it could be the best way to invest.

    And if you’re looking to find out more about the latest buy-to-let hotspots, consider some of our buy-to-let city guides, including:

    planning finances and saving money - best way to invest money.
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    Dale Barham

    Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.

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