Britain’s housing market regained strength in September, following a turbulent summer marked by fluctuating interest rates and political uncertainty. The Bank of England’s (BoE) first interest rate cut in more than three years, combined with increased political stability after the July 4 election, played a key role in boosting market activity, according to property portal Rightmove.

Rise in Asking Prices

Rightmove reported a 0.8% increase in average asking prices for homes in September, reversing a sharp 1.5% drop in August. This growth was double the usual rise for this time of year and the largest September increase since 2016. Compared to the same time last year, asking prices were 1.2% higher, reaching an average of £370,759 ($487,140). This marks the fastest annual price rise in over a year.

Tim Bannister, Rightmove’s director of property science, highlighted that the housing market was invigorated by the formation of a new government and the BoE’s first interest rate cut since 2020. This created a “window of opportunity” for both buyers and sellers, increasing market activity beyond what is typically expected in September.

Improved Buyer Demand and Sales Surge

The combination of political stability and falling mortgage rates led to a notable increase in buyer demand. Rightmove’s data showed that the number of sales agreed between buyers and sellers rose by 27% from a year ago, demonstrating the effect of lower borrowing costs. The average five-year fixed mortgage rate dropped to 4.67% in September, a significant decrease from 6.11% in July 2023.

The Royal Institution of Chartered Surveyors (RICS) supported these findings, showing a sharp rise in sales expectations for the coming months as sentiment across the housing sector improved.

Impact of Interest Rate Cuts

The BoE’s interest rate cut to 5% in August—the first reduction since the onset of the COVID-19 pandemic—further fuelled the housing market recovery. Markets anticipate that the BoE will keep interest rates at 5% in its next meeting on September 19. Cooling wage growth and stabilizing inflation, which dropped to 2.2% in July from a peak of 11.1% in October 2022, have also set the stage for another rate cut later in the year.

While September typically sees a rise in property prices, this year’s increase was particularly strong, with Rightmove reporting that the growth was driven by larger properties. Four-bedroom detached homes and similar larger properties saw a 0.8% price increase, while three-bedroom properties and smaller non-detached homes rose by 0.7%. Smaller properties experienced a more modest 0.2% increase.

Political Certainty and Future Concerns

Prime Minister Keir Starmer’s Labour government has promised to reform Britain’s planning system, including setting mandatory targets to accelerate housebuilding. However, despite these pledges, the ongoing shortage of homes is likely to keep property prices elevated for the foreseeable future.

Looking ahead, Britain’s finance minister, Rachel Reeves, is scheduled to deliver the first annual budget on October 30. There is speculation that buyers and sellers are rushing to complete transactions before any potential changes to the current tax structure are announced in the Autumn Statement.

Bannister echoed these concerns, noting that although momentum is expected to continue, uncertainties remain regarding the BoE’s next rate cut and how different segments of the housing market will respond to the government’s budget announcements.

Sellers Gaining Confidence

Homeowners appear more confident about entering the market, with Rightmove reporting a 14% increase in the number of new sellers compared to September of the previous year. Additionally, the average number of homes available for sale per estate agent reached its highest level since 2014, a positive indicator for buyers seeking more options.

This renewed market confidence, coupled with falling borrowing costs, has created a unique environment for potential homebuyers and sellers alike. As buyer demand continues to recover, those looking to purchase property are also mindful of how their average UK savings could impact their ability to make significant financial investments in the housing market.

While the housing market’s short-term outlook appears positive, all eyes are on the upcoming Autumn Statement and the BoE’s next move. Whether the government’s housing reforms, and additional rate cuts can sustain this recovery will be crucial in determining the long-term trajectory of Britain’s property market.

With expanding real wages and further rate cuts expected in 2025, the future of Britain’s housing market looks set to remain in the spotlight as both political and economic factors continue to influence market activity.