As the weather warms, the days get longer, and the spring blooms sprout in all their glory, winter is now officially behind us.
But, as we look at the housing market over the next few weeks, are we likely to see a spring uplift for sellers or will it be more a case of coming back to earth with a bump and a continuation of 2023?
House Prices
Certainly the signs are encouraging that the spring is the beginning of a better year for the UK housing market in 2024. UK house prices fell less dramatically in 2023 than the double-digit drop some had predicted and have generally held up since.
Although spring is always a strong season for the buying and selling of property new figures from the Rightmove House Price Index published in March show that average prices rose 1.5% month on month. This is higher than the 22-year average of 1.0%. The average house price rose to £368,118 – the biggest increase in ten months.
Increased Demand
The number of property sales is also up, 13% higher than this time last year, according to Rightmove. It’s fuelled by buyer demand 8% up on 2023. Such increases are being driven by a number of factors, including an easing of the previous pressure on mortgage rates, as well as the fact that average asking prices are still £4,776 below the May 2023 peak. That means buyers are more tempted to buy properties that are realistically priced to sell, with predictions that sales in 2024 will exceed the million transactions seen during 2023.
The Impact Of Inflation And Interest Rates On Mortgages
Of course sales are influenced primarily by what’s happening with mortgage rates since that impacts buyer affordability. The early weeks of 2024 saw some lenders cutting rates although they have edged up again slightly since. The average 5-year mortgage rate was 4.84% in mid-March compared to 4.64% five weeks ago, according to Rightmove.
However, mortgage rates are driven by the impact of inflation and interest rates. And here, too, the shoots of recovery are evident, with renewed optimism of a market set to pick up.
In March, inflation dropped to 3.4%, down from 4% in January and its lowest rate in over two years. The government is targeting 2% by the second quarter. The following day saw the Bank of England hold the base rate at its sixteen-year peak of 5.25% for the fifth time in a row. Although interest rates cuts had been called for it was a more confident vote than February when two votes called for an increase of the base rate.
The Bank of England won’t rush a base rate cut, but many economists believe that it will begin to happen from June and that by late 2025 the base rate could be cut to around 3%. This will mean that mortgage rate cuts are once again more likely, providing the much-needed release of pent-up demand and a true blooming of the UK housing market.
Proctors is an independent network of individual estate agent businesses with branches in Beckenham, Bromley, Park Langley, Petts Wood, Shirley and West Wickham. We’ve been buying, selling and letting in these areas since 1946. Get in touch to find out how we can help you with your property requirements.