The Bank of England cut the base rate of interest to 5% this month for the first time since the start of the Covid-19 pandemic.

The base rate had previously been raised to 5.25% - the highest level since the 2008 banking crisis – due to unusually high inflation. While the higher rate did eventually help bring inflation back down to the government’s 2% target, it had a significant effect on property buyers.

Mortgage lenders raised the cost of borrowing along with the base rate and that made buying a property too expensive for many homebuyers and investors.

Additionally, many who already owned property were unable to remortgage and release equity. That kept people in place by limiting their ability to move – another factor that reduced demand for homes and affected the market.

Expert analysts believed that what the property market needed was a cut in the base rate, and the world of property waited patiently as the Bank of England kept the rate at 5.25% seven times in a row.

The theory went that reduced interest rates would lead to cheaper borrowing costs from mortgage lenders. In turn, that would make buying property more affordable and it would give both buyers and vendors the confidence to get back in the market.

Increased confidence on both sides of the transaction would create more competition for the available homes and push property prices up.

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UK property market activity is growing fast

Now, the latest data from the leading property portal Rightmove suggests that this theory has been proven correct. Within the space of a month, the Bank of England’s rate cut has already given the property market a boost.

Figures show that the number of potential buyers contacting estate agents has jumped 19% year-on-year since 1st August when the base rate of interest was cut. In July – before the rate cut – annual demand had increased by just 11%.

The UK market has always been resilient. In fact, it had already taken a better turn this year following a tough 2023. The average house price grew by 1.3% in the first half of the year according to Savills as normal growth began to return.

UK buy to let property has always been a more reliable option that other investments like stocks and shares. The effects of the interest rate cut have confirmed this.

The impact of the rate cut can also be seen in the mortgage market. High street lenders began cutting their borrowing costs in anticipation of the Bank’s decision, and they are likely to continue offering lower rates again in the months and years to come.

The average five-year fixed mortgage rate is now 4.8% compared to 5.82% at the same time in 2023. For two-year fixed rates, it is possible to get a sub-4% mortgage rate again for the first time since before the pandemic.

Tim Bannister, Rightmove’s director of property science, said: “As the summer holiday season comes to an end, the conditions are there for a more active autumn market.

“The reaction from home-movers to what is hopefully only the first of several rate cuts over the next year or two, combined with other positive data and trends, has led us to raise our price prediction for the year.”

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Will the UK property market keep growing in 2024 and 2025?

This is a good time to invest in UK property. It is anticipated that the Bank of England will continue gradually cutting the base rate of interest, bringing it down to approximately 3.5% by the end of next year.

Given that the first small cut this year has already produced such a positive outcome in the property market, we can look ahead and forecast more good news for property owners in the future.

Speculation strongly suggests that the next cut in the base rate might come as early as next month, though more likely in November. Either way, everyone knows it is coming and Autumn will be busy as a consequence.

Tom Bill, the head of UK residential research at Knight Frank, said: “Markets are pricing in a further cut in 2024, which means transaction volumes should be stronger this autumn than last year. […] We expect [price growth] to be 3% in the UK this year.”

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Is this a good time to invest in UK buy to let property?

That means this is a time of great opportunity for buy to let investors to get ahead of the market and make the most of a new property cycle.

By purchasing an off-plan buy to let property now, you can buy while prices are still relatively low and benefit from property values growing during the construction period.

Furthermore, you can then benefit from the cost of mortgages falling over the next 18-24 months. When buying off-plan, you pay the balance on completion so you will be able to secure a mortgage at a lower rate in the future.

Investing now gives you the opportunity to benefit at both ends of the transaction – making for a very strong investment opportunity and the ideal chance to build your portfolio.

Want to learn more about investing in property and the best UK buy to let locations? Get in touch with the team today.