High mortgage rates create a mini-housing bubble

25/01/2024
(Last Updated: 31/01/2024)
6 min read

Average House Price London (Nov)

£505,283

Sales Volume London (Sept)

4,860

Average House Price England & Wales (Nov)

£296,812

Sales Volume England & Wales (Sept)

41,841
Key Takeaways for January 2024

  • Property sales fell by 43% year on year for England and Wales, making September a record low for the month.
  • House prices remained close to record highs at £296,812 in England and Wales until September.
  • Bank of England base rate holds at 5.25% and is not set to change until mid-2024
  • Property Mark reports, "Prospective buyer numbers continue to fall" and a "26% reduction in new properties coming to market".
  • More affordable mortgage products come to market.
  • One-third of adults in the UK will run out of money by the end of January due to higher winter bills and financial strain, a survey from Credit Karma.
  • Tesco Bank stated that 49 percent of UK adults have some form of non-mortgage debt, which is £4,340 on average.
  • Read our local housing market reports for - London, Kent, Hampshire, West Midlands, Essex and West Yorkshire.

January 2024 Housing Market Report

After a flat 2023 with record low sales volumes in June, July, August and October, this year has already started showing signs of a buoyant year. After so many consecutive months of low sales volume caused primarily by high mortgage rates, the housing market has inadvertently created a mini-bubble of home-buyers with the funding, ready for lower mortgage products.

The Royal Institution of Chartered Surveyors (RICS) stated that estate agents are more optimistic about house sales than ever since before the pandemic (2019). This increased optimism comes amid easing mortgage costs and hopes that the Bank of England will cut interest rates. The RICS’ gauge of 12-month sales expectations rose 10 per cent in December to 34, its highest level since February 2020.

More house sales on the one hand; however, the Office for National Statistics (ONS) stated UK house prices fell at the fastest rate in a decade in November. Land Registry data echoes this trend as house prices fell by 3% yearly to £296,812.

After a year of high inflation and 14 consecutive base rate increases, the Housing Market leaves 2023 flat and deflated, although some property commentators are seeing the seeds of growth for 2024.

According to the Royal Institution of Chartered Surveyors, UK surveyors are more optimistic about future house sales than they have been for almost two years. November 2023 marked the first rise in sales expectations since early 2022 as mortgage rates dropped following consecutive months of no change to base rates. The measure of forecasted sales in the next three months rose to six in November, up from minus 17 in October.

The above is echoed by Zoopla as they stated the number of agreed property sales so far in January 2024 is 13 per cent higher than a year ago. At SAM Conveyancing, we saw a 20% increase in January, which is very exciting for the coming year as the base rate reduces and allows even more of the mini-bubble caused by high mortgage products to come to market.



What our survey revealed about homebuyers
Our survey, conducted by YouGov, reveals the top challenges faced homeowners when buying their most recent property, plus the true costs of defects when skipping a home buyers survey.


What are homebuyers looking for?

When will the base rate fall in 2024?

Oxford Economics, Investec and Deutche Bank, reported that inflation would fall below the Bank of England’s target by April 2024. As a result, the Bank of England may be forced to bring forward the date of its first suggested interest rate cut in June.

Associated British Foods suggests conflicting reviews, stating that inflation in the UK would not return to levels seen before Russia invaded Ukraine (Feb 2022 at 5.5%) because of rising wages. I think what is meant is that we won't see inflation rates falling under 2%, as they did from 2018 to 2021.

Will the base rate go down in January? No. The Bank of England is expected to hold interest rates at 5.25 per cent this week following progress in getting inflation down. I expect to see the base rate start to reduce from March onward and reductions at a very small rate.



Source: Office for National Statistics (ONS)




Lowest sales volume for September


London Property sales fall by 50%. A Cartoon of a man trying to hold up the property market with ropes

London has the lowest sales volume for September since records began, achieving just 4,860 sales, 74% down on the previous year's 8,453. The severe lack of properties to buy in London, alongside the high mortgage rates, is seeing house prices fall. We haven't seen sales volume this low for September since 2008's post-financial crash.

Average house prices in London fell year on year by 6% to £505,683 for November 2023.

Source: House Price Index (HPI)


England & Wales

England and Wales echo London with a 76% fall year on year, making September the worst on record at 41,841. There is, however, hope for the market as we see mortgage approvals for home purchases up in November. We will see if this turns into successful house purchases in our February and March 2024 housing market report.

Average house prices in England & Wales fell year on year by 3% to £296,812 for November 2023.



Source: House Price Index (HPI)


Mortgage reports


Mortgage products

As of January 3, the average five-year fixed rate mortgage was at 5.53%, down from 5.65% on December 3, according to Moneyfacts data. Two-year fixed rates have also fallen, down from 6.04% last month to 5.92% on January 3.

Halifax and Leeds Building Society dropped their mortgage rates on January 2, and other banks have been, and will likely continue, following suit as they try to attract customers with competitive rates.

Borrowers are set to benefit from the decrease in rates, Kevin Roberts, managing director at Legal & General Mortgage Services, told ITV News .

Home buyers

Mortgage approvals for home buyers is up on last year by 9%; 50,067. The falls seen for 2023 started to reduce in October, and now November offers hope that the housing market has more affordable mortgage products.

Source: Bank of England


Two-Thirds of English Housebuilding Fund Unspent

The Financial Times reported that more than two-thirds of the Government’s £4.2 billion Housing Infrastructure Fund remains unspent more than six years after its launch. Just 31 per cent of the fund has been spent to date.

The government confirmed that work has begun on less than one in ten of the promised homes and has reduced its housing delivery target through the fund from 340,000 to 270,000. We need to see a greater supply of property to meet the demand across England and Wales. It is clear that in the run-up to a general election, any government wanting to win needs to have a housing pledge at the top of their manifesto. Labour has already pledged to build 150,000 new homes every year for 10 years - the question, as always, is whether they will or can, do it.


Source: House Price Index (HPI)

Andrew Boast FMAAT MIC
CEO and Author | SAM Conveyancing

Summary

June to September were dire for sales volume as the housing market lacked affordable mortgage rates. Those buyers who would have moved sat tight, waiting for the coming new year.

With confidence that the base rate isn't increasing and inflation is declining, mortgage lenders are offering more competitive products and the market is already showing signs of movement in November.

Now January is upon us, at SAM Conveyancing, we have seen a 20% increase in sales volume compared to last year, which indicates a mini-housing bubble of buyers coming to market after holding off. Dare I say we have a housing market that has hope for 2024...let's see!

Sources: Latest data from - Gov.UK, Bank of England, UK House Price Index, ONS and Property Mark (NAEA).

Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing
Reviewed by:
Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.
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