Interesting developments in the UK’s housing market reveal a positive outlook for the mortgage market, offering renewed hope for both homeowners and builders.
There’s no denying the market is challenging but it’s a positive that we are seeing mortgage rates falling. Many industry experts are predicting that top mortgage rates could dip below 5% again, but the timeline on that is uncertain at the moment.
The general consensus is that as many had already factored in previous base rate increases to their pricing, the majority will follow suit and we’ll see a consistent drop across the board.
The question is, did they go too far? As much as it is positive to see that rates have declined, potential homebuyers could be sitting on the fence for longer as they hope for further falls.
New build planning consents
Meanwhile, the new build industry continues to feel the crunch, with recent data from the Department for Levelling Up, Housing and Communities revealing that between April and June this year, only 8,000 residential projects received planning consent in the UK.
Of that 8,000, only 900 major residential decisions were granted. This marks an 11% decline compared to the same period last year, reaching the lowest level in over a decade. Minor residential permissions have also seen an 8% decrease.
Meanwhile, research conducted by the Home Builders Federation (HBF), which used data from Glenigan , revealed a more pronounced decline of approximately 20%.
Stewart Baseley, chairman of the HBF, aptly noted: “Over recent years, the policy environment has become increasingly anti-development and anti-business, and as a direct result, we are seeing a sharp fall in the number of homes being built.”
Stable house prices
Despite these challenges, the UK House Price Index for August showed a 0.2% year-on-year increase in average property values and a 0.3% month-on-month change.
However, they did record a slight 0.1% fall in the year to September, the first annual fall since 2012, according to the Office for National Statistics (ONS).
Overall, the market is currently more predictable and allows buyers to more accurately plan their finances. In fact, demand is on the rise, with an 11% increase in residential transitions compared to July 2023.
Mortgage rates – and subsequently house prices – are stabilising. Even in the new build industry, we’ve seen a 3.9% decrease in house prices, which may encourage more homebuyers for 2024.
The UK housing market continues to stay afloat and stable market performance is always a good thing, and this consistency indicates that it will continue to stand its ground as the year draws to a close.
However, it’s important to recognise that these figures provide only a surface-level view, and the housing market’s intricacies become apparent when we delve into specific locations, cash buyer dynamics, and market segments.
Further mortgage rate reductions on the way
Looking ahead to the end of the year, we can anticipate further rate reductions, assuming the Bank of England’s base rate remains unchanged.
With the two-year swap rate now lower than the base rate, it seems likely that rates will gradually decline, offering even more favourable financing options for homebuyers.
Moreover, we can look forward to some long-awaited lender innovation in mortgage products tailored to buyers of new homes, with promises of more flexible and attractive options on the horizon.
For MAB New Homes, Shared Ownership has seen an impressive year-on-year increase of around 10%. As steady sales continue, it will be interesting to see if the industry as a whole receives more government support in this area, especially considering ongoing concerns surrounding affordability in the market.
Finally, as we approach the next general election, both major political parties have expressed a five-year aim to reach 70% homeownership.
A lofty goal? Perhaps, and it is only one that can be met if the government also strives to better the lack of housing supply in the UK.
Furthermore, Prime Minister, Rishi Sunak, has hinted at the possibility of a Help to Buy revival, which could further boost the housing market and provide vital support for aspiring homeowners.
We saw a lot of positive movement during the first iteration of Help to Buy, and we look forward to hearing further news about this in the coming months.
As the end of 2023 approaches and with rate reductions on the horizon, we can remain cautiously optimistic about the future of the housing market.
With falling mortgage rates, the potential for more sales and government initiatives, and a commitment to increasing homeownership, there are plenty of reasons to be positive about the road ahead.
Mobeen Akram is national new homes account director at Mortgage Advice Bureau
