Improving buyer confidence continues to support market momentum

Nicky Stevenson, Managing Director of Fine & Country, looks at what has been happening in the UK property market during the first month of the year

Related topics:  Property,  Housing Market
Property | Reporter
6th February 2024
Nicky Stevenson 123

The new year has got off to a promising start as falling mortgage rates continue to boost confidence among buyers. And with interest rates being left unchanged at 5.25% for the fourth consecutive announcement, indicates that the Bank of England is keen to maintain current stability.

Nicky comments: “The signs are that the interest rate has peaked, and the next move will be a reduction, although that could be some months away. Forecasters at leading institutions have suggested that the inflation rate will halve to 2% by April.

"Recent cuts to mortgage rates have led to rising confidence in the housing market, with 85% of estate agents noting improved buyer confidence in the past three months. According to the GfK Consumer Confidence Tracker, consumer confidence levels are at their highest since January 2022."

Stevenson notes that activity within the market is starting to grow, with news sales agreed up 13% in the first three weeks of January, compared to the same period last year, indicating sellers' confidence for the year ahead.

She says: “The measure has risen across all regions and countries and is highest in Yorkshire & The Humber, which is up 19%, and the West Midlands, up by 17%. This rebound in sales activity indicates an increasing alignment between buyers and sellers on pricing.

However, with Zoopla reporting one in five sellers accepting more than 10% below the asking price to achieve a sale, pricing attractively remains key.

“Residential property prices grew at their strongest rate in a year during January, an uptick of 0.7% and just a slight 0.2% decline on the same month last year. This was a significant improvement on the 1.8% annual decline reported by Nationwide in December. The average new seller asking price also increased by 1.3% in January, over double the 10-year January average of 0.6%.”

According to Stevenson, the latest Bank of England data shows that mortgage approvals have reached a six-month high, increasing to 50,500 in December. This third consecutive monthly increase in mortgage approvals indicates the building of market momentum and return of pent-up demand as buyers cautiously return to the market.

The ‘effective’ interest rate or the actual interest paid on newly drawn mortgages fell by six basis points to 5.28% in December, the first drop in over two years.

“Lenders are competing for business and the best fixed-rate mortgage deals are now below 4%.

"According to Moneyfacts, mortgage product choice has risen for the sixth consecutive month, reaching 5,899 options in January, a 15-year high. As the market stabilises, the average shelf life has increased to 21 days, the highest level since June,” she comments.

Focusing on the prime markets, Stevenson says that the average price of a property is £1,257,784, having moderated slightly by -1.8% year-on-year, but remains stable month-on-month. Areas that have done particularly well and are showing positive annual growth, are the North West and Yorkshire & The Humber, with both regions seeing growth of 1.2%, and the West Midlands at 0.4%.

So far this year, the number of buyers contacting agents about homes for sale is 8% higher than last year and the number of new properties being listed by sellers is 11% higher. Interest is expected to continue into February, which together with April is the month in which homes listed are most likely to find a buyer.

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