Property Market Update: February 2024

Welcome to the February edition of the Property Market Update! We've collated information from experts from across the UK to provide you with a comprehensive view of the current market.

Across the various indices, average house prices rose in January - the largest increase in a year according to both Halifax and Nationwide. A promising start to 2024 and a sign of burgeoning market activity.

Average new seller asking prices are up by +1.3% to £359,748, reports Rightmove, the biggest December to January increase since 2020. Prices are still 0.7% lower than this time last year.

Following a record number of home sales launched on Boxing Day, the number of new properties arriving on market is 15% higher than at the start of last year. This rides on the back of the Royal Institute of Chartered Surveyors’ (RICS) report that the decline in new buyer inquiries has halted and more people are searching for a new home.

The Bank of England (BOE) base rate remains unchanged at 5.25%, despite a surprise increase in inflation from 3.9% to 4% (November to December). While a majority decision, one member of the Monetary Policy Committee (MPC) was in disagreement, arguing for a further reduction.

House prices rise in January, the largest increase in a year

Both Nationwide and Halifax have reported that average house prices have risen significantly across the UK, marking a positive start to the year.

The building society reported that the average property was now worth £257,656, rising by 0.7% after seasonal effects. As a result, the annual rate of house price growth lifted from -1.8% to -0.2%, the strongest outrun since January last year.

Halifax, the UK’s largest mortgage provider, said a typical home was now priced at £291,029 on average, a 2.5% lift from January 2023.

While Rightmove’s asking prices typically rise in the period of December to January, the price hike this January (+1.3% to £359,748) is its largest since 2020, and more than double the 20-year average of +0.6%.

Underpinning these performance signs is a strong labour market, and the advent of falling inflation and improving mortgage rates have no doubt contributed to this healthy January.

New buyer inquiries improve, indicating growth in market activity

On the 18th January, RICS released a report that claimed negative buyer enquiry activity had reduced for the fourth consecutive month, following a massive leap from -13% in November to -3% in December. For the first time since April 2022, we are moving into neutral territory in this area.

Perhaps motivated by the positive signs from the mortgage market and fewer inflationary pressures, potential homebuyers are making arrangements to take their next step on the property ladder. Indeed, since the 27th of December, Rightmove has seen 9 of its ten busiest days ever for buyers applying for an agreement in principle.

January is on course to be the busiest month ever for Rightmove’s AIP service since its launch in 2022.

The appetite for new homeownership is being met with equal gusto from would-be sellers. The number of new homes coming to market is 15% higher than at the start of last year, following a record number of sellers launching their listings on Boxing Day.

Base rate holds while mortgage rates fall

The Bank of England made a majority decision to hold its base rate at 5.25% after its Monetary Policy Committee’s meeting on February 8th. This followed the surprise announcement that inflation has increased from 3.9% in November to 4% in December 2023.

However, one member of the MPC called for an immediate reduction in borrowing costs, suggesting that the central bank was moving closer to reducing the base rate in future meetings. Many anticipate a rate cut from as early as June, but the BOE has remained steadfast in that it would need to see further reductions to inflation before acting.

The Bank of England’s base rate is the primary indicator by which many banks and building societies adjust their mortgage deals. The higher the base rate, the higher mortgage interest rates. The current BOE base rate is the highest since the immediate aftermath of the 2008 Financial Crisis.

But while the base rate remains intimidating, positive signs from the BOE, such as choosing to hold the base rate rather than increase it (as it had for 11 months in a row last year), and having managed to reduce inflation, have led to price falls in the mortgage market.

As of the 1st of February, current mortgage rates, according to Moneyfacts, are as follows:

• 5.56% for 2-year fixed rate
• 5.18% for 5-year fixed rate

The best mortgage deals remain those which are designed borrowers who can afford large deposits. These include five-year mortgages with interest rates below 3.99%, but with Loan-to-Values of 60%.

Richard Donnell, the Executive Director of Research at Zoopla, argues that while home sales will be encouraged by falling mortgage rates, their impact on house prices will be indifferent.

“Last year, mortgage rates fell to 4.2% in the first 3 months of the year, which supported sales volumes and led to only modest price falls. We expect current mortgage rates to have the same effect this year, supporting sales volumes rather than hugely impacting house prices.”

Summary: Full steam ahead?

So with January an apparent success, is it full steam ahead for the market? It’s hard to say but it feels like we’re on the right track.

If you’re thinking about selling your home this year, there’s one thing for certain: you need to get a swift start on your financing. Get a basic idea of your home’s value, or better yet, hear what the experts are saying. If you already have a keen estimate, always request an agreement in principle from a mortgage provider you’re considering.