Housing market shows resilience amid high interest rates

The UK housing market is proving resilient in the face of high interest rates, according to Nicky Stevenson, the managing director of Fine & Country.

She says that the market is recalibrating to a higher interest rate environment, and that sentiment should slowly improve as buyers and sellers increasingly know where they stand.

Ms Stevenson notes that the Bank of England’s decision to hold interest rates at 5.25% in September was a good sign for the housing market, since it indicates that the Bank Rate is at or very close to its peak.

She adds that inflation is steadily easing, forecast to end 2024 at 2.6%, improving the outlook for future rate cuts.

Average house price in September

According to Nationwide, the average house price in September was £257,808, showing no monthly change compared to August.

This was an improvement on the 0.4% decline that economists had previously anticipated for the same period.

Ms Stevenson says that house prices have been resilient in the face of high borrowing costs, and that regions less stretched on affordability have seen shallower falls.

Ms Stevenson said: “The prime market remains particularly strong, with positive year-on-year growth of 2.4%.

“The average price of a property in the prime market is now £1,271,287, and all regions bar one had positive annual growth.”

Mortgage market activity

She also points to mortgage market activity, an indicator of future demand, which dipped in August, with 45,000 approvals – that is 8% lower than in July.

Ms Stevenson said: “This is a 14% improvement on the start of the year, although it remains below the long-term average.

“The Bank of England reported that gross mortgage lending rose from £19.1 billion in July to £19.7 billion in August.

“With increasing competition between lenders as we move through autumn, activity should pick up again.”

Affordability is still a challenge

However, Ms Stevenson also acknowledges that affordability for those relying on mortgages is still a challenge after sustained high interest rates.

She says that buyers now entering the market are particularly conscious of their budget and are careful not to overstretch themselves.

Ms Stevenson adds that there are around 80% more homes available for sale than in September 2021, which means that there may be headroom for buyers to negotiate with sellers, putting pressure on asking prices.

She says: “Affordability remains stretched but is slowly improving, with mortgage rates continuing to fall on the back of dipping swap rates.

“The average five-year fixed rate has dropped below 6%, after reaching 6.38% in August.

“Those with a low loan to value or no mortgage are in a particularly strong position.”

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