Base Rate Drops to 4.75%: Brace for a 30% Surge in House Prices by 2028!
The Bank of England has announced a reduction in the Base Rate to 4.75%, marking the second cut this year. This move is part of the Bank’s strategy to manage inflation, which recently fell to 1.7%, below the government’s 2% target. The decision aims to support the broader economy by making borrowing cheaper and encouraging spending.
In the mortgage market, reactions have been mixed. Some lenders have increased their rates, while others have decreased them, largely due to fluctuations in swap rates, which affect the cost of mortgages for lenders. Experts suggest that while we might see a slight increase in average mortgage rates in the short term, they are expected to fall again as the market adjusts to the new Base Rate.
For homeowners with fixed-rate mortgages, monthly payments will remain unchanged until the end of their current deal. However, those with tracker or variable rate mortgages will benefit from the Base Rate cut, seeing a reduction in their monthly payments. The Mortgage Charter, introduced in July 2023, offers additional support by allowing borrowers to lock in new deals up to six months before their current rate ends, helping to manage their payments more effectively.
Looking ahead, the UK housing market is projected to see significant growth, with house prices expected to increase by 25% by 2028. This forecast reflects ongoing demand and economic factors that continue to drive the property market.
With the anticipated end of global conflicts and Donald Trump assuming office in January 2025, stability is expected to return to international markets. This could further boost confidence and economic activity, potentially driving house prices up by as much as 30% by 2028. If this scenario unfolds, the average house price in the UK, currently around £267,100, could rise to approximately £347,230.
As a result, the rush to secure a house purchase is likely to intensify in 2025, with buyers eager to lock in their investments before prices climb even higher. This surge in demand could further fuel the housing market, making it a competitive environment for prospective homeowners.
The Bank of England’s Monetary Policy Committee meets every six weeks to review and set interest rates. While further cuts are possible, the pace and extent of these changes will depend on broader economic conditions. The next interest rate decision is scheduled for December 19, 2024, and will provide further insight into the Bank’s approach to managing the economy and supporting financial stability.
