Borrowing costs fell sharply yesterday after a top Bank of England official suggested interest rates could be cut by the middle of next year.
Amid signs of life in the housing market, the two-year bond yield fell more than 0.1 percentage point to a five-month low of 4.6 percent, while the 10-year yield fell an amount similar up to 4.22 percent.
It came after Bank of England chief economist Huw Pill said interest rates could be cut from their 15-year high of 5.25 per cent by the summer.
Pill said it “doesn’t seem totally unreasonable” to expect the first reduction to occur in August 2024.
The central bank is likely to “consider or reassess” its position on rates by then “if nothing new has happened” to change the outlook, he said.
Rate relief: Bank of England chief economist Huw Pill (pictured) said interest rates could be cut from their 15-year high of 5.25% by the summer.
“But of course it’s very unlikely that anything will change during that nine-month period,” Pill added.
The comments took markets by surprise, driving down borrowing costs.
“This is the first time a major central bank has started talking about cuts,” said Mohit Kumar, chief economist at Jefferies.
The Bank of England has kept rates at 5.25 percent in its last two meetings, after 14 consecutive increases.
The chief executive of online property agency Purplebricks said yesterday that the decision to pause the rate hike cycle has boosted business.
Sam Mitchell said: ‘We have seen an unexpected boost in October after a quiet September.
“The Bank of England held firm on interest rates, an extremely positive decision for the property market, which has led to a rebound in demand during the last week of September and into October, and with a second hold this month We hope the trend continues.
“After a difficult year, both clients and real estate agents can be optimistic about the state of the sector.”
Housebuilder Persimmon also said it has seen a recovery in sales activity with a “strong rebound since the beginning of October”.
The developer increased its home construction target for the year from 9,000 to 9,500 following the rebound. Meanwhile, data from Halifax showed UK house prices rose in October after six months of decline.
House prices rose by 1.1 per cent, or £3,000, compared to the previous month, taking the average value to £281,974.
The report came as FTSE 250 developer Vistry signed an £813m deal with Leaf Living and Sage Homes, both owned by private equity giant Blackstone, to build more than 2,900 homes as it continued to merge its partnerships and construction units. households.
London estate agent Foxtons has acquired smaller rival Ludlow Thompson for £10m as part of its plans to grow its lettings division.