A major driver of this growth was a sharp rise in home buying. Buyers rushed to complete deals before a property tax break ended on March 31. This created a strong push in the housing market.

Consumer spending also increased. The growth was revised up to 0.4%, from an earlier estimate of 0.2%. People spent more on housing, transport, services, and household goods. Many households used their savings to cover these costs. Even so, the savings rate stayed solid at 10.9%.

Manufacturing played a key role as well. Businesses raised production early in the year. They were preparing for potential import tariffs from the United States. Some of those tariffs have now been delayed, reducing pressure on firms.

Despite the strong start, the outlook is mixed. Early estimates show a 0.3% drop in output for April. This was caused by a few one-off events that disrupted activity.

The Bank of England expects growth to slow in the second quarter. It now forecasts a 0.25% rise between April and June. Even so, the strong first quarter may ease the need for new tax increases. Finance Minister Rachel Reeves says the trend is encouraging.

Business and consumer confidence are also rising. A recent survey showed employer confidence at a nine-year high. Economists believe the earlier dip in spending and hiring was only temporary.

With two more interest rate cuts expected this year, spending may continue to rise. That could help support further economic growth in the months ahead.

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The Bank of England’s first rate cut in four years has ignited a resurgence in the UK property market, with cheaper mortgages fueling buyer interest and driving up house prices.

Since the rate cut announcement on August 1st, the property website Rightmove reports a 19% increase in potential buyers reaching out to estate agents compared to the same period last year. This follows an 11% rise in inquiries in July. The Bank’s decision to lower its key base rate from 5.25% to 5%—the first reduction since the onset of the COVID-19 pandemic—comes after a year of elevated borrowing costs aimed at curbing inflation.

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Despite July’s inflation rising to 2.2%, surpassing the Bank’s 2% target, it remains significantly lower than the peak of 11.1% observed two years ago due to the Russian invasion of Ukraine and subsequent energy price spikes. The rate cut has led to an acceleration in the availability of more affordable mortgages from high street lenders, which has significantly boosted buyer demand.

In response to these developments, Rightmove has revised its house price forecasts from a predicted 1% drop for the entirety of 2024 to a 1% increase in new seller asking prices. The property website anticipates that further rate cuts could create a buoyant autumn market.

Financial markets expect the Bank of England to continue reducing rates, potentially to 3.5% by the end of next year. The next Bank meeting in September is anticipated to keep rates steady, with potential reductions resuming in November.

Average new seller asking prices fell by 1.5% this month, or £5,708, to £367,785—consistent with the long-term average decline for August. This drop aligns with seasonal trends, as prices typically fall during the summer’s quieter months.

READ ALSO: Value of UK housing stock dropped by £27bn in 2023 as high costs hurt market

Tim Bannister, Rightmove’s Director of Property Science, noted, “As the summer holiday season ends, conditions are favorable for a more active autumn market. The anticipated rate cuts, combined with other positive data and trends, have led us to upgrade our price forecast for the year.”

High street lenders are responding to the central bank’s move by reducing mortgage borrowing costs. The average five-year fixed-rate mortgage has dropped to 4.80%, down from 5.82% a year ago but still higher than three years ago. This is the lowest rate since Liz Truss’s mini-budget in September 2022.

Increased political certainty following Labour’s general election victory in July and an improved economic outlook are also contributing to heightened buyer interest. Josephine Ashby of John Bray Estate Agents remarked, “With the general election behind us, we’re seeing increased buyer engagement due to greater political and economic certainty.”

READ ALSO: UK Housing Market Shows Signs of Recovery Amid Potential Interest Rate Cuts

However, challenges remain. Borrowing costs are still elevated compared to three years ago, and housing affordability remains a concern for many families. Tom Bill of Knight Frank warns that while transaction volumes are expected to rise this autumn, ongoing uncertainty around the budget and the end of favorable mortgage deals may temper price growth, which is projected to be around 3% for the UK this year.

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