UK Home Mortgage Market Stable While Housing Prices Drop
The number of homes offered for sale in the UK has jumped over the past year in spite of falling house prices, as owners become more confident in the stability of the mortgage market and sellers show greater realism on prices. There was an average of 25 homes being offered per estate agent in March, up from 14 for the same month last year — a rise of 78 per cent. Though demand — measured by the site’s researchers as people making active inquiries on a property — was down 43 per cent on last year, the number of sales subject to contract fell by only 16 per cent. That suggests transactions are on track to hit 500,000 for the first six months of this year, according to forecasts that draw on HMRC data and the historic record of agreed sales reaching completion. Covering one month, the positive indicators come amid a gloomy picture on house prices, with lenders such as Nationwide showing sharp price falls via their monthly indices. House prices declined by an annual rate of 3.1 per cent in March. There are going to be structural pressures for people to keep moving, just out of a need. That’s going to keep the market moving. Sellers appear more willing to be flexible on price, the data suggested, with asking price discounts averaging 4 per cent (£14,000 on average). The average UK homeowner has made £45,000 on the value of their home in the last three years. If people are having to give away £15,000 on a discount, as long as they’re getting that discount on the next house, it keeps the market moving. There’s a realism on the part of sellers. Activity was not equally distributed across the market, however, as the share of sales in the bottom 40 per cent of the market by value rose over the year by 5 percentage points, against a drop of 4 points in the top 40 per cent share of the market. A more stable mortgage market following the turmoil of the mini budget in September 2022 had also tempted people back into the market. Average rates on five-year fixed-rate mortgages have this week fallen to 5.03 per cent from 5.63 per cent at the start of the year. Two-year fixes dropped from 5.79 per cent to 5.33 per cent. While average rates are far higher than a year ago, they have fallen back from the October levels of more than 6 per cent. HSBC, TSB, NatWest, Halifax, Virgin Money are among the lenders to have cut rates on their fixes over the few days. For well-heeled buyers seeking larger loans, Barclays slashed the rate on its five-year fix from 5.59 per cent to 4.3 per cent — with a fee of £1,999 and a loan size of between £2mn and £10mn. The transaction activity to continue increasing after Easter, though there remained uncertainties over the economic outlook. The main risk is around some kind of macro deterioration, such as stickier inflation, meaning rates have to stay higher for longer than expected. And there’s a sensitivity to mortgage rates.