Property Market News Update - May 2024

Welcome to the May edition of the Property Market Update!

The burning question is, how are experts around the UK viewing the current markets situation? Both Halifax and Nationwide, prominent players in the industry, have reported minimal fluctuations in average house prices. Halifax observed a slight increase of +0.4%, while Nationwide saw a modest decrease of -0.4%. These stable price trends suggest a stabilization in market conditions, with the main challenge being the high interest rates associated with new mortgage deals. As of 1st May, the average two-year fixed rate stood at 5.91%, and the average five-year fixed rate was 5.48%. These rates have increased from the previous month, where they were 5.80% and 5.39% respectively. The impact of higher interest rates is particularly felt by first-time buyers. According to a recent nationwide survey nearly half (49%) of first-time buyers have postponed their plans in the past year, with 41% citing elevated mortgage costs as a barrier to purchasing a property. Additionally, Rightmove's data indicates that the most significant growth in market activity is seen in the higher end of the property market. The number of new sellers in this segment has increased by 18% compared to the previous year, with a 20% rise in the number of sales being agreed upon.

Not much change in the housing market

In April, national indices indicated minimal variation in average house prices. Halifax, the bank, disclosed that the average value of a UK house stood at £288,949, reflecting a monthly increase of +0.4%. In contrast, Nationwide, the building society, stated that the average UK house was valued at £261,142, showing a monthly decline of -0.4%. These slight changes imply that the growth of house prices, as well as overall market expansion, is being restrained by the elevated interest rates associated with existing mortgage offers.

Although average house prices have not shown significant growth, the price of newly listed properties has increased, as reported by Rightmove. The average asking price for new housing stock has risen by +1.1% to £372,324, coming close to surpassing the record set in May 2023 by just £540.

Evidently, there is a notable surge in market activity occurring within the highest tier of the property ladder. The number of new sellers in this category has increased by 18% compared to the previous year, with a 20% rise in the number of sales being agreed upon. This trend is logical as sellers at this level are not as affected by the challenges related to mortgage affordability that first-time buyers or second steppers face. Furthermore, following a period of restricted supply, there is now a greater availability of options and heightened demand within this segment.

Mortgage rates are on the rise

According to local mortgage brokers Asset Plus, average mortgage rates have increased in May. As of 1st May, the average two-year fixed rate is 5.91%, and the average five-year fixed rate is 5.48%. These rates have risen from 5.8% and 5.39% at the beginning of April. With speculation regarding potential adjustments to the Bank of England's base rate in the future, average mortgage rates have been gradually climbing. Despite some adjustments earlier this year, interest rates are currently double what they were two years ago. Zoopla reports a significant -23% decrease in home sales in 2023 due to these rate hikes, leading to declines in house prices as well.

The good news

Indeed, there is a positive aspect to consider. As per the Bank of England (BOE), the quantity of mortgages approved for house purchases rose by +1.4% in March 2024, reaching 61,325 approvals. This represents a notable increase of 20.1% compared to the data recorded in March 2023. This indicates that although affordability continues to pose a challenge, the situation is not deteriorating. Consequently, some prospective buyers who were previously unable to purchase a property last year are now finding themselves in a position to do so.

House prices and mortgage rates remain key issues for first time buyers

Based on a recent nationside survey, it was found that almost half of first-time buyers (49%) have postponed their plans in the last year. Within this group, the primary reasons for the delay were identified as house prices being deemed too high and mortgage costs being perceived as excessive (41%). Interestingly, over 84% of respondents mentioned that the current cost of living crisis had impacted their intentions to purchase a property. As the value of flats has experienced a significant increase in the first six months of the year, it is evident that first-time buyers are managing heightened borrowing pressures by opting for smaller properties.

The market appears to be transitioning into a cautious phase. The full impact of declining inflation on the mortgage industry is yet to be realised. Until the base rate starts to decrease in the latter part of the year, mortgage rates will remain a challenge for numerous individuals, particularly first-time buyers. As we approach a bustling summer season and an upcoming General Election, it is advisable for prospective sellers to capitalize on the current stability and seize the opportunity presented by heightened market activity.