Falling Mortgage Rates Set to Boost Prices this Spring

The UK housing market is poised for an active spring, thanks to lower mortgage interest rates and increased buyer confidence. The latest HMRC report shows an encouraging increase in property transactions, pointing to a promising recovery in the housing market.

A report released by HMRC showed that the number of property transactions rose marginally by 1% to 82,940 between January and February. Top UK mortgage providers such as Santander, HSBC and Barclays have linked the rise to increased buyer self-confidence as inflation and interest rates appear to be stabilising.

“While challenges remain, it is encouraging to see far more competition on pricing and product innovation than tighter economic conditions allowed last year.”  Kevin Roberts, Legal and General Mortgage Services

Since last August, the Bank of England has maintained a steady base interest rate of 5.25%. KPMG, a renowned accounting firm, has forecasted that four interest rate rises are possible between now and 2022. Additionally, the inflation rate dropped to a two-year low of 3.4% in February.

Mortgage Rates Cut: A Game Changer

Santander, HSBC, and Barclays have reduced their mortgage rates in an attempt to attract potential homebuyers who were previously hesitant to enter the market in 2023. Some institutions have even introduced new deals.

Independent financial analyst Moneyfacts says the average two-year fixed rate deal now stands at 5.8%, while a five-year deal is on offer at 5.38%. Given the improving economic outlook, experts are predicting that these rates could fall below 4% in the coming weeks.

Property brokers have also played a central role in these changing housing market conditions. As Nick Leeming, chairman of estate agent Jackson-Stops, commented: “While the figures show signs of stability, the recent fall in inflation and the expectation that the Bank of England will cut the base rate in May are paving the way for an upturn in the spring”.

Recently, Yorkshire Building Society announced an unprecedented 99% mortgage that would allow a buyer with a deposit of just £5,000 to secure a loan on a property worth up to £500,000. This could encourage more first-time buyers to enter the market.

However, despite the positive predictions, HMRC data shows that the number of property transactions is still 6% down on the same period last year. However, experts believe that the trend could soon change due to the potential of progressively cheaper fixed-rate deals.

The Dynamics of the Housing Market

Stuart Cheetham, a mortgage broker at MPowered Mortgages, suggests that these more affordable deals have attracted many potential buyers to the market. Cheetham notes that estate agents have reported an increase in both the number of prospective buyers and the number of homes being listed, resulting in a more fluid property market and a healthier sales pipeline.

Yet, Cheetham warns that, while the outlook is positive, demand is not yet outstripping supply, which could lead to price inflation. Therefore, it is crucial for buyers to be cautious and make informed decisions.

Nicky Stevenson of estate agents Fine & Country suggests that with demand building, spring could be an excellent time for sellers to market their properties. It is important to price properties sensibly, especially for those looking for a quick sale.