House prices remain stable as declining mortgage rates stimulate a surge in demand
According to Nationwide, house prices stabilised in December, with an overall decrease of 1.8% throughout 2023. Despite this average, regional variations are significant, with East Anglia experiencing the most substantial annual decline of 5.2%, while Scotland demonstrated resilience with a modest growth of 0.6%. Although prices have proven more stable than anticipated, smaller declines may impact future growth later in the year.
The stability in house prices can be attributed to the downward trend in mortgage rates, as lenders compete in a sluggish market and anticipate an earlier reduction in the Bank of England base rate.
Oxford Economics now forecasts the first base rate cut in May, a revision from previous predictions. Revised GDP figures in December, indicate that the economy was weaker in 2023 than the earlier figures implied. Combined with a faster-than-expected decline in inflation, shift the economic focus from inflationary concerns to the risks of recession. However, the timing of the base rate cut remains contingent on forthcoming economic data.
Increased demand in the housing market is a direct response to the falling mortgage rates, although it has yet to reach pre-Covid levels. Surveyors reported a rise in demand in November, with sales agreed reaching a 9-month high in December, according to TwentyCI. New mortgage approvals also saw an uptick in November, reaching 76% of the 2017-19 monthly average. This growing demand, coupled with a narrowing gap compared to supply, has alleviated the downward pressure on house prices.
January 2024 has also seen a 20% higher rate of sales agreed than the first week of January last year, buyer demand in the first week of 2024 is also 5% higher and new properties coming onto the market is 15% higher compared to the same period in 2023. All of these statistics highlight significant positivity for the market moving forward into 2024.
Rightmove also experienced a record Boxing Day bounce in sellers coming to market, with the average price of homes put on sale between Dec. 3 and Jan. 6 being 1.3% higher than the month before, the biggest December to January rise since 2020 and more than double the average increase for this time of year, Rightmove said. which is an early positive sign that buyers and sellers are out there and taking action, likely including some movers who had put their plans on hold last year.
Whilst growth rates still remain high nationwide, they have now slowed across all regions due to mounting affordability pressures. Due to regions such as the South West, North East, and Wales experienced the strongest growth, with 37% of local authorities seeing annual increases of 10% or more.
According to Nationwide, house prices stabilised in December, with an overall decrease of 1.8% throughout 2023. Despite this average, regional variations are significant, with East Anglia experiencing the most substantial annual decline of 5.2%, while Scotland demonstrated resilience with a modest growth of 0.6%. Although prices have proven more stable than anticipated, smaller declines may impact future growth later in the year.
The stability in house prices can be attributed to the downward trend in mortgage rates, as lenders compete in a sluggish market and anticipate an earlier reduction in the Bank of England base rate.
Oxford Economics now forecasts the first base rate cut in May, a revision from previous predictions. Revised GDP figures in December, indicate that the economy was weaker in 2023 than the earlier figures implied. Combined with a faster-than-expected decline in inflation, shift the economic focus from inflationary concerns to the risks of recession. However, the timing of the base rate cut remains contingent on forthcoming economic data.
Increased demand in the housing market is a direct response to the falling mortgage rates, although it has yet to reach pre-Covid levels. Surveyors reported a rise in demand in November, with sales agreed reaching a 9-month high in December, according to TwentyCI. New mortgage approvals also saw an uptick in November, reaching 76% of the 2017-19 monthly average. This growing demand, coupled with a narrowing gap compared to supply, has alleviated the downward pressure on house prices.
January 2024 has also seen a 20% higher rate of sales agreed than the first week of January last year, buyer demand in the first week of 2024 is also 5% higher and new properties coming onto the market is 15% higher compared to the same period in 2023. All of these statistics highlight significant positivity for the market moving forward into 2024.
Rightmove also experienced a record Boxing Day bounce in sellers coming to market, with the average price of homes put on sale between Dec. 3 and Jan. 6 being 1.3% higher than the month before, the biggest December to January rise since 2020 and more than double the average increase for this time of year, Rightmove said. which is an early positive sign that buyers and sellers are out there and taking action, likely including some movers who had put their plans on hold last year.
Whilst growth rates still remain high nationwide, they have now slowed across all regions due to mounting affordability pressures. Due to regions such as the South West, North East, and Wales experienced the strongest growth, with 37% of local authorities seeing annual increases of 10% or more.