Is the worst of the housing market over?
Are we out of the trees?
Is there light at the end of the tunnel?
Have we crossed the final hurdle?
Can I think of any more metaphors?
The answer to the last question is no. The answers to the other questions are maybe!
The driving force behind the slowdown in the housing market has been the increased rate of inflation. Higher inflation has caused the cost of living crises through higher prices for groceries and fuel. This has forced the Bank of England to increase the base rate to try and curb inflationary pressures which has led to higher mortgage rates.
These factors resulted in people having less money in their pocket and being adverse to committing to moving home. Increased mortgage rates meant repayments increased which reduced the level of debt buyers could take on, all of this has led to a decrease in prices and activity in the housing market.
However, there is encouraging news. Andrew Bailey the governor of the Bank of England said this week that “disinflation” will take a big step next month when the effect of last year’s sharp energy price rises falls out of the annual inflation calculation. Experts believe inflation could drop from 6.7% to as low as 4.9% in October, the lowest in two years.
If inflation does fall it may mean the base rate has peaked at the current rate of 5.25%. There may also be scope for the base rate to fall during 2024.
Mortgage rates are falling, albeit slowly. Average rates on a 2 and 5-year fixed rate are 6.47% and 5.97% respectively. The lowest rates available are currently from The co-operative bank on a two-year fixed rate at 5.1% and from Virgin Money on a 5-year fixed rate at 4.85%. Both with a 60% LTV.
James Raspin, Chief Surveying Officer at Survey Hut comments:
“We are seeing increased activity in the housing market. Home buyers are hopeful mortgage costs will reduce over the medium term but have accepted that the days of 1% mortgage rates are over. If people need to move house for additional space or a change in circumstances they are getting on with it. We are seeing many sellers accepting offers just below the asking price which is perhaps reflective of the weak housing market.”
