Declining inflation “ignites optimism” for a mortgage market with increased competitiveness

While a slowdown in the housing market is expected, forecasts now indicate a more moderate deceleration than originally predicted earlier this year.

Nicky Stevenson, the Managing Director of Fine & Country, emphasized the ongoing promise in the property market, with eager buyers actively searching for appropriately priced homes. She pointed out:

“Despite prevailing economic conditions, transaction numbers remain stable. The most recent data from HMRC reveals a seasonally adjusted total of 85,870 transactions in June, marking a 6% increase over May figures. Although this represents a 15% decline from June 2022, it underscores the market’s resilience. Moreover, mortgage lending saw an increase in June, reaching £20.0 billion, with net approvals hitting 54,700, the highest since October 2022, indicating positive signs for future borrowing.”

Stevenson observed that in response to buyer affordability challenges and rising mortgage expenses, the average asking price for properties entering the market dipped slightly by 0.2% this month. Sellers are becoming more open to market realities, with 6.5% of available homes undergoing asking price reductions of 5% or more, surpassing the five-year average. She continued:

“According to the latest market update from TwentyCi, there are ‘no indications of a housing market crash,’ based on Q2 sales volumes and a significant 70% of all listed properties being sold in 2023 so far. Despite this optimism, an uncertain economic backdrop is reflected in a 10% increase in fall-throughs compared to Q1.

Nevertheless, both buyer and seller confidence has surprisingly remained strong, with two-thirds of sellers confident they will find buyers within three months, and 74% of buyers expressing confidence in purchasing property within the same timeframe. Buyer demand has also shown a 3% increase compared to 2019, as reported by Rightmove, indicating continued interest in appropriately priced homes.”

Amidst the uncertainty, determined homebuyers continue to pursue their goals, particularly for smaller, reasonably priced homes in affordable areas near major employment centers.

However, Stevenson noted, “mortgage interest rates are having a more significant impact on higher-value segments of the market where borrowing costs are more pronounced.”

According to Stevenson, another market-shaping trend is the growing demand for energy-efficient homes. According to the latest RICS survey, homes with higher Energy Performance Certificate (EPC) ratings have demonstrated greater resilience in pricing compared to those with lower ratings. Additionally, over a third of respondents expressed increased interest in energy-efficient properties. Stevenson added:

“Resilience remains evident, with the average property price standing at £1,299,767. Although experiencing a marginal 0.1% decrease from the previous month, the prime market has witnessed a substantial 8.2% year-on-year increase.

Cash continues to be the preferred option for buyers in this segment, who are largely unaffected by mortgage rate fluctuations. Furthermore, the scarcity of prime stock seen during the pandemic seems to have eased, as availability in the £1 million+ price bracket has risen by 45% since the onset of the pandemic.”