The reaction from the money markets to Rachel Reeves’ Budget has prompted fresh hopes of lower borrowing costs, with both Knight Frank Finance and Market Financial Solutions saying that steadier gilt yields and a firmer pound could lead to cheaper fixed-rate mortgages, if conditions hold.

Simon Gammon (main picture), Managing Partner at Knight Frank Finance, says: “At £22bn, the Chancellor’s headroom remains relatively narrow, but it’s an improvement. There were no obviously inflationary measures in the Budget either, and Gilt yields have been broadly stable. The speech paves the way for another rate cut from the Bank of England in December, and perhaps another early next year.

We’d expect to see an increase in the number of fixed rates in the range of 3.5% on the other side of Christmas.”

“Given where mortgage rates stand, we’d expect to see an increase in the number of fixed rates in the range of 3.5% on the other side of Christmas. This would be enough to maintain activity at current levels, which is comparable to the period leading up to the pandemic.

Brighter picture

And Paresh Raja, CEO of Market Financial Solutions, says: “For property buyers, one of the most important parts of this Budget was how the markets respond.” And, he adds that, so far, the market response is positive and that, “This paints a brighter picture for the all-important cost of borrowing, which is integral to the performance of the property market; it determines sentiment, confidence, planning and spending power.”

Although he adds: “The full picture still needs to be understood, so we should not be counting chickens just yet.”

The money markets were reportedly encouraged by the news that the Government will have almost £22bn of fiscal headroom over the next five years, which will bring some much-needed stability.