The cut in interest rates from 5.25% to 5% in August encouraged more buyers back to the market in September, causing the number of mortgages taken out to jump by 700 over a month to 65,600.
But Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said fears around a hike in the rate of Capital Gains Tax on property sales also spurred second homeowners and buy-to-let landlords to sell up.
She added: “Lower inflation, improving borrowing conditions and robust income growth have eased the affordability challenge for many buyers in recent weeks following the Bank of England’s decision to make its first interest rate cut since the start of the pandemic.
“The prospect of at least one more rate reduction this year – with the first expected early next month – is likely to catalyse the property sector even more though buyers, sellers, second homeowners and buy-to-let landlords are now on tenterhooks as they wait to see what Chancellor Rachel Reeves will deliver in her Budget on Wednesday.”
Haine added: “Concerns over a hike in the CGT rate on second homes or buy-to-lets – something that has fuelled a surge in the number of landlords and second homeowners selling up to avoid a heavy tax bill – may prove unfounded, but the increase in listings has boosted the number of homes available for first-time buyers looking to get a foot on the ladder.”
How will this impact house prices?
As an indicator of future borrowing, mortgage approvals also provide an insight into property prices.
Laith Khalaf, head of investment analysis at AJ Bell, said today’s mortgage data bodes well for house prices, which have been steadily rising throughout the year.
“The housing market has been bolstered by falling interest rates and less inflationary pressure on UK consumers,” he said.
“A more buoyant property market will be good news for homeowners and the economy at large. The fact prices rises look to be in the post is a bad omen for those looking to make their first step onto the property ladder though. Whether there is any help for first time buyers in the Budget remains to be seen.”
