Braking the Bank

After a particularly tricky summer, it looks like there might be some good news for the housing market at last – and, thankfully, we aren’t in the midst of a budget disaster, as we were this time last year. Over the last few weeks, there have been three bits of ‘good news’. Although it probably won’t help sales this year, it may mean 2024 will be better than is perhaps currently forecast.

Base rate held at 5.25%, mortgage rates on the way down

Following 14 rises since 2021, the base rate was forecast by some to rise again on 21st September, to 5.5%, but it was actually held at 5.25%.

I was presenting at the 2023 International Property Care Conference at the time and literally jumped for joy – not easy after a knee operation! I still can’t quite believe rates reached above 5%, as it was obvious that was going to make buying a home for first-time buyers – the one sector that was driving the market this year – much more difficult.

Better still, the base rate hold appears to have had a good impact on mortgage rates, which have started to come down over the last few weeks, some even dropping below 5%.

According to the latest figures from Moneyfacts (9th October):

• The average 2-year fixed residential mortgage rate is 6.41%, down from 6.55% at the end of September
• The average 5-year fixed residential mortgage rate is 5.96%, down from 6.04% at the end of September

And Which? has reported, “Dozens of mortgages now below 5%”, with the ‘leading rate’ for home movers and FTBs coming from Virgin Money: 4.82% (fee: £1,295) for 60% or 75% LTVs. For those remortgaging, they quote Yorkshire Building Society, with a rate of 4.92% (fee: £1,495).

Borrowers need to take expert advice from a mortgage broker.

Although it comes with a large product fee – 5% of the mortgage cost – Skipton is now offering a two-year fixed rate mortgage for 3.35%, as long as you also have a 40% deposit. Clearly, borrowers need to take expert advice from a mortgage broker, but it’s certainly worth being aware that this option exists. (source: https://www.ftadviser.com/mortgages/2023/10/10/skipton-launches-3- 35-mortgage-to-support-borrowers/#)

And the latest forecasts from Capital Economics estimate that the base rate will fall to 4.75% towards the end of 2024 and as low as 3% by 2025.

Income growth still looking good

According to ONS data from May to July 2023: “annual growth in regular pay (excluding bonuses) was 7.8%, the same as the previous three-month period and the highest regular annual growth rate since comparable records began in 2001.”

Halifax points out that with strong wage growth comes improved affordability, with the house price to income ratio now at its lowest level since June 2020 (6.2 in September vs 6.3 in August). Although that’s not a big leap, it will help everyone afford higher mortgage payments.

Transactions picking up – but still a tough a market

Looking at the weekly transactions from TwentyEA, up until the base rate hit 5% in June, weekly net sales were running at just over 17,000 a week. Over the summer, sales dropped as low as 12,000 one week, but the latest data for the end of September shows that between weeks 38 and 39, sales were back up to nearly 16,000.

Have property price falls bottomed out?

We need a bit more time to declare this, but the year-on-year figures up until the end of September were comparing the relatively ‘good’ year of 2022 to a poor 2023. Data for October should, in theory, be comparing this year to the start of the market stalling at the end of 2022.

For example, Nationwide started to report monthly falls in October last year, and this year their stats show that although mortgaged property prices had fallen 5.3% year on year in August, they were no lower in September. Meanwhile, Rightmove reported that asking prices increased slightly, albeit by a margin that is “lower than is usual for this time of year”.

Of course, these are just some ‘snippets’ of good news, there are still plenty of headwinds that could derail not only a ‘recovery’ but a market that just stops falling. And, as ever, ‘market performance’ really depends on what’s happening at a local level and the type of property being sold – and only agents know that!