Mortgage Rates Drop Ahead of October Budget Statement
Throughout the month of September, we’ve seen the effects of August’s Bank of England (BoE) base rate cut unfold. Countless lenders updated their mortgage rates to offer more competitive products to potential borrowers.
The effects on the prime property market in Edinburgh have been almost immediate with both prospective buyers and sellers getting in touch to schedule viewings or get bespoke advice on a potential sale. We predict that September’s momentum will continue into October as we’re getting ready for the Labour government’s first budget to be released at the end of the month.
Borrowers Benefit from Widest Choice of Mortgages in Years
It’s fair to say that the property market in Scotland had been slow for a number of months leading up to the BoE’s rate reduction in August. At the same time, it’s also true that the city of Edinburgh and period property in the city have always created their own microclimate regarding property sales and purchases. Simple market forces like limited supply and healthy demand ensured these properties remained sought-after.
Over the past two months, the prime property market has picked up even greater momentum. As both high street and specialist lenders have updated their mortgage products and launched deals featuring interest rates below 4%, activity has increased across all market segments.
At Ativa, very few days have gone by in September when we haven’t arranged viewings or talked to prospective sellers about bespoke marketing plans for their properties.
What Another Potential Base Rate Drop Could Mean
As expected by a majority of economists, the Bank of England maintained August’s base rate in September. That hasn’t put a dampener on the optimism gripping prime property sales, though.
Buoyed by the wider availability of competitive mortgages, potential buyers are keen to close deals before the end of the year. Market sentiment was also helped by the interest rate drop by the Federal Reserve in the United States. Within hours of the Fed’s announcement, Pound Sterling strengthened against the U.S. Dollar.
Plus, we’re expecting one or possibly even two more interest rate cuts in the U.K. which would mean more good news for prospective buyers. At the time of writing, economists seem to agree that November will be the most likely time for the drop in interest rates in the U.K.
How Edinburgh’s Prime Property Market Has Responded
It’s too early for solid statistics on the effect of the lower interest rate on property sales in Edinburgh. For the moment, we are simply relying on metrics like increased viewings and overall interest.
The most recent available statistics from Registers of Scotland comprise of July’s UK House Price Index. Published in the latter part of September, those figures show a 6% increase in house prices between July 2023 and July 2024. House prices had also increased between June and July 2024.
The volume of residential property sales also increased from May 2023 to May 2024. In May, property agents across Scotland closed nearly 9,000 deals, which equals an increase of nearly 20% over the course of a year.
As we saw in previous months, prices for high-value homes like detached and semi-detached properties grew faster than prices for other types of houses, outperforming the national average. As the effects of the BoE base rate drop take hold, we’re likely to see more increases in both volume and price.
What to Expect from the October Budget Statement
While we’re not expecting news from the Bank of England this month, Labour Chancellor Rachel Reeves is getting ready to present the new government’s first budget at the end of October.
Early indications had centred on a tough budget, but speeches during the recent Labour Party conference sounded more upbeat. Still, we expect tax increases, including capital gains tax and inheritance tax.
It’s too early to speculate what the budget will mean for Edinburgh prime property owners, but we’ll keep a close eye on the budget speech and make sure to update you in the next edition of our Edinburgh prime property market update.
If you would like to discuss your period property or are looking for your next home in Edinburgh, don’t hesitate to get in touch with us. You can contact our Director, Fiona Vernon on 0131 699 0333 / 07900 605674 or email [email protected].
