Base rate cut: excited to see my house price go up

The Bank of England has cut its base rate. This could herald better days for the value of his home, Mouthy Money editor Edmund Greaves says.

So, they’ve done it again! Cut the base rate! Looks like more to come too this year. We could be at 3% by 2026 (if my own back of a packet calculations are anything to go by). This could do wonders for my house price.

The truth at this point is it doesn’t really directly affect me all that much. I’m one of those smug a*******s who locked in low for long back in 2022. 

But my renewal is up in 2027 and things are certainly moving the right way for that. But there is something else about my house that this news will be good for – how much its worth. 

Low rates, high prices

Here’s how things work (at least in theory). When rates are high(er) there is less money in the system looking for a home. More of it is locked up in savings, or spent paying down expensive debts.

But when rates are low – as was the norm from around 2009 to 2022 – then savers struggle to find a good place to park their cash so as to beat inflation. This leads to an asset price boom.

One of those assets which did particularly well is property – housing.

But for those of us who bought just as this boom was ending, i.e. when rates were soaring upwards, this hasn’t been the story.

House prices, broadly, have barely moved. I can’t be the only homeowner who gets the monthly Zoopla email telling me how much my house is currently worth.

Although how online data is able to tell me that with significant accuracy (Zoopla if you’re reading this please drop me a line!), my home’s value has bobbled up and down around what we paid for it for around three years now.

LISTEN: Mouthy Money podcast on why the bank rate is falling

Property market bonanza

Are we about to have a property market bonanza? Perhaps not. The economy is near enough in the bin. This isn’t making it easier for people to cobble together deposits, moving costs, stamp duty fees and everything else.

But the FCA is looking at easing mortgage criteria which should bring more buyers onto the market.  And the more rates get cut the cheaper mortgages will be and the better this will support house price rises. 

We’ve also actually experienced something of an affordability reversal as workers have seen their wages rises substantially in the past two years, while property prices have stood still.

For my part, we’re not going anywhere for now so the value of the house is sort of irrelevant. The least I can ever hope for is not to be in negative equity. 

Are the heady days of soaring house prices coming back for homeowners? Time will tell.