MHHG estate agents

This report provides a comprehensive analysis of the current housing market as we enter October. The market is adjusting to higher borrowing costs, with interest rates held steady at 5.25%. This stability is seen as a positive sign, and buyer and seller sentiment is expected to improve as clarity increases.

Pricing Trends

In October, the average UK house price remained steady at £257,808, with no significant change from September, according to Nationwide. This stability contrasts with earlier expectations of a 0.4% decline, highlighting the resilience of house prices in the face of elevated interest rates. Regions with better affordability experienced milder price declines. The prime housing market continues to show strength, with a positive year-on-year growth rate of 2.4%. The average price of a property in the prime market is now £1,271,287, with most regions reporting positive annual growth.

Market Activity

Mortgage market activity dipped in August, with 45,000 approvals, an 8% decline from the previous month. However, this represents a 14% improvement since the start of the year, though it remains below the long-term average. Gross mortgage lending increased from £19.1 billion in July to £19.7 billion in August, as reported by the Bank of England. With growing lender competition, market activity is expected to regain momentum in the autumn.

In October 2023, consumer confidence increased to -21, up from -25 in September, marking the highest level since January 2022 and surpassing expectations. This boost is attributed to the prospect of lower mortgage rates, with Zoopla recording a 12% increase in buyer demand since the August Bank Holiday weekend. It's important to note that the average time to finalize a sale increased to nearly 20 weeks, up from 16 weeks in 2021. Transaction numbers showed a slight increase in August, with 87,000 transactions, albeit 16% lower than the previous year. Three-quarters of buyers in August expressed confidence in their intention to purchase a property within the next three months

Increased Choice

Affordability remains a challenge for mortgage-dependent buyers, given sustained high interest rates. The number of homes available for sale has surged by 80% compared to October 2021, providing buyers with more negotiation leverage and putting pressure on asking prices. The average discount on asking prices reached 4.2%, the highest level since March 2019.

Market Outlook

Affordability is gradually improving as mortgage rates trend lower due to declining swap rates. The average five-year fixed-rate mortgage dropped below 6% from 6.38% in August. Inflation is easing and is forecasted to end 2024 at 2.6%. This is a positive sign for the Bank Rate, expected to stabilize. As buyers gain certainty about the market, sentiment is likely to improve as volatility decreases. Prices are expected to soften into 2024, with forecasts suggesting a rebound of 9% between 2025 and 2027.

In summary, the housing market is adjusting to high interest rates and increasing buyer choice. The unexpected interest rate decision and the resilience of house prices are positive indicators. With improved consumer confidence and favorable mortgage rate trends, the market is expected to regain momentum. However, the future remains uncertain, and market participants should remain adaptable to evolving conditions and changing buyer expectations.