The Bank of England’s rate-setting committee made its first move in more than seven years this month. Contrary to strong indications in the past, the move was not a base rate rise, but a cut to a new ultra-low rate of 0.25%.
The rate change came in the wake of closely-watched business surveys which suggested that the Brexit vote had delivered a knock to confidence, investment intentions and trading activity.
While the moves by the Bank of England seem to echo those taken after the financial crisis, there is one big difference. Banks are now much better capitalised than in 2008 and 2009, so there is still an appetite to lend.
In fact, the rate cut means that mortgage rates, some of which are already at record lows, could edge slightly lower, encouraging buyers. New data from the CML shows the number of mortgages taken out by first-time buyers in July rose to the highest level since 2007.
There is more detail on all aspects of the residential and rural markets in Knight Frank’s new Post-Brexit market update andRisk Monitor.
Prime market update
Average prices in prime central London fell by 1.5% over the year to the end of July, down from a recent peak of 8.1% in June 2014, although the headline figure hides areas of outperformance. In the prime country house market annual growth eased to 1.3% in the year to the end of June, down from a high of 5.2% in 2014, while in Scotland prime property prices fell by 0.6% annually.
Rental market
Average UK rents rose by 2.4% in the year to June, slightly down on the 2.5% growth seen in the year to May and the 2.6% reported in April. Prime central London rents were down 3.6% on the year at the end of July, as higher stock levels and uncertainty surrounding the outcome of the EU referendum weighed on growth. This trend was mirrored in the Home Counties, where rents fell by 0.8% annually over the year to June.
