As we enter the typically busy autumn months, for the property market, Lawson Estate Agents Managing Director, Darren Lawson reports on the recent and prevailing market conditions. Based in Woolwell, Darren reports that average new seller asking prices have seen a tiny seasonal drop of 1.5% (-£5,708) over August to £367,785. August has seen a monthly decline in prices from July for the last 18 years, with this month’s fall in line with the long-term average.
As Darren predicted in his last report, The Bank of England has cut interest rates. The reduction is the first rate cut for four years has led to an immediate upturn in buyer activity: The number of potential buyers contacting estate agents about homes for sale has jumped from 11% up on the prior year across the month of July, to 19% up since the 1st of August compared to the same time a year ago Based on this, industry leaders have raised their 2024 forecasts from -1% to +1% due to positive market data and trends compared to the much more subdued 2023. This is illustrated by the number of sales being agreed now being some 16% ahead of the near-peak-mortgage-rate period of a year ago! Meanwhile, the number of new sellers coming to market is 5% ahead of last year as confidence to move grows.
Weekly mortgage trackers show that the average 5-year fixed mortgage rate is now 4.80%, an improvement from 5.82% a year ago. The best available 5-year fixed rate is now 3.83% for those with a 40% deposit, the lowest a 5-year fixed rate has been since the period before the mini-Budget in September 2022.
The average price of property coming to the market for sale has seen an expected seasonal drop of 1.5% this month (-£5,708) to £367,785. New seller asking prices have fallen in the month of August for the past 18 years, and the size of this month’s drop is in line with the long-term average. The distractions of school summer holidays traditionally bring a dip in prices, as some buyers put their home-moving plans on hold to enjoy holidays or time with family. This has also amplified since Covid lockdowns. This also means that new sellers who do come to market at this quieter time of year may have a pressing need to sell, which means they tend to price more competitively. However, summer sellers this year may find that there is a degree of buyer buzz around the market that was missing in the peak-mortgage-rate market at this time last year. As anticipated in Darren’s previous report, the first Bank of England rate cut for four years at the start of the month has helped to accelerate mortgage rate drops and contributed significantly to improved buyer demand. These better conditions are helping to set up a positive Autumn market, and a further spur to activity following the Bank Rate cut has led industry forecasters to raise its 2024 forecast from a 1% drop over the whole of 2024 to a 1% rise in new seller asking prices.
Darren goes on, “The first Bank Rate cut since 2020 has sparked a welcome late summer boost in buyer activity. While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment. As the summer holiday season comes to an end, the conditions are there for a more active autumn market. The reaction from home-movers to what is hopefully only the first of several rate cuts over the next year or two, combined with other positive data and trends, has led me to raise my price expectation for the year. I now expect new seller prices to rise marginally by 1% over the whole of 2024. This is a relatively small revision from my previous prediction of a 1% fall in prices over the year in my last “market report” for The North Plymouth Links Magazine, where I previously forecasted a slight drop in prices this year, were interest rates to remain at their peak level.”
Since the Bank Rate cut on the 1st of August, the number of potential buyers contacting estate agents nationally to view homes for sale is 19% higher than in the same period a year ago. We must be mindful that this comparison is with a very subdued period in 2023, following Liz Truss and Kwasi Kwarteng’s infamous autumn budget in 2022 when the market was dealing with the fallout of unexpectedly high inflation figures and the subsequent peak mortgage interest rates. However, this improvement in the buyer demand trend from +11% across the month of July shows the immediate and strong impact of the first Bank Rate cut since 2020. Nationally, estate agents are reporting that increased political certainty and the improving economic outlook is also helping with buyer interest.
The positive impact of the Bank Rate cut, combined with other encouraging market data, has led Darren to revise his end-of-year price prediction upwards — from a 1% drop in new seller asking prices over the whole of 2024, to a 1% rise over the year. He anticipates modest price rises in the autumn, followed by the usual seasonal monthly falls in prices at the end of the year. Though there are still some uncertainties ahead – October’s Budget, the timing of a second Bank Rate cut, and the US economy to name just three – the scene is now set for a positive remainder of the year. The number of sales being agreed between buyers and sellers continues to track very positively at 16% ahead of last year, and the number of new sellers coming to market is now a stable 5% ahead of this time last year. Both of these statistics suggest greater confidence and assurance in the housing market.
Mortgage rates continue to head downwards and have picked up some pace in recent weeks. The average five-year fixed mortgage rate is now 4.80%, which though still high compared with three years ago, before the first of 14 consecutive Bank Rate increases, is an improvement from 5.82% at this time in 2023. Industry weekly mortgage trackers show that the best available 5-year fixed rate is now 3.83% for those with a 40% deposit, the lowest that a 5-year fixed rate has been since the period before the aforementioned mini-Budget in September 2022.
Darren concludes, “Although it will likely take a few more cuts to the Bank Rate for home-movers to see a more substantial reduction in mortgage rates, it’s home-mover sentiment that has immediately been heightened. Buyers and sellers are more optimistic about the outlook for the market, evidenced by the immediate upturn that we’ve seen in activity. However, though optimism around the direction of mortgage rates is justified, the reality is that they are still very high compared with a few years ago, and there will be some who need rates to drop further before their affordability is notably improved. Buyers are still stretched, and so sellers mustn’t get too carried away by the higher buyer activity levels compared with last year and need to “come to market” with a realistic asking price, in order to achieve a sale.”
