"The market is adjusting to higher borrowing costs and what we need is continued price stability which will create the environment for continued growth in sales and home moves. It’s important sellers remain realistic on what they can achieve for their home"
- Richard Donnell - Zoopla
More homes coming to market and returning confidence among buyers has seen the number of sales agreed up by 12% against this time last year.
The latest data released by Zoopla this morning also revealed that UK house price growth has remained broadly flat at -0.2% this month, contributing to a more balanced market. Zoopla expects 100,000 more sales this year than in 2023 (1.1m in 2024 versus 1m in 2023) so long as sellers continue to remain realistic on pricing.
Mortgages repayments are still 61% higher impacting buying power
This positive increase in sales is beginning to reflect in other data such as mortgage approvals for home purchase which were 32% higher in February 2024 compared to the previous year, marking a return to pre-pandemic levels.
However, despite improving consumer confidence mortgage rates remain around 4.5% compared to sub 2% in March 2021. Higher mortgage rates are adding to affordability pressures for buyers and this is acting as a drag on house price inflation.
The average home buyer using a 70% loan-to-value mortgage faced annual mortgage repayments that are 61% higher today than three years ago (March 2021) before mortgage rates started to rise - in monetary terms, the annual mortgage repayments have risen from £7,100 to £11,400.
Higher mortgage rates drive two-thirds of this increase, but a third is down to the fact that house prices are 13% higher than 3 years ago. (March 2021).
Higher mortgage rates have hit southern England hardest
At a regional and country level there has been a 50% to 70% increase in mortgage repayments for a typical buyer between 2021 and 2024 with the largest monetary impact felt in southern England where house prices are simply higher.
The annual cost of mortgage repayments for an average-priced home is more than £5,000 a year higher in 2024 than in 2021 across the South West, South East and East of England.
This rises to a high of an extra £7,500 in London. Across other regions and countries of the UK, the increase is lower, ranging between £2,350 and £3,900 a year.
While underlying household incomes will vary by area, lower mortgage increases are one reason that market activity and prices are holding up better in more affordable markets with lower house prices.
6 in 10 homes in markets registering annual price falls
The squeeze on housing affordability from higher mortgage rates, lower income growth and rising living costs is keeping house prices in check across southern England.
Analysis of Zoopla’s granular local authority house price indices reveals that 64% of all homes are in markets still registering annual price falls. This is lower than the 82% recorded last October with the scale of these price falls being relatively modest - in most cases between 0% and -3%.
The coverage of homes in markets with price falls is greatest across southern England where 95-100% of homes are now in local markets with annual price falls. The East Midlands also has a high proportion of markets with price falls at 93%.
Across the rest of Great Britain there are signs of improvement in pricing, with a decline in the proportion of homes in local markets with annual price falls across six regions. Scotland has pockets of lower prices but at a national level, prices haven’t fallen year on year. As the UK’s most affordable region with an average price of £142,000, the North East now has no areas with annual price falls.
Richard Donnell, Executive Director at Zoopla comments: “The rebound in sales being agreed continues for a fourth month as mortgage rates have fallen, consumer confidence improves and home buyers have a much greater choice of homes for sale. The pipeline of sales is growing and we expect 100,000 more people to move home in 2024 than last year.
"There is clear evidence that house prices are firming and the pace of price falls is slowing. We don't believe that prices will start to rise as buyers face much higher mortgage repayments than in the recent past.
"The market is adjusting to higher borrowing costs and what we need is continued price stability which will create the environment for continued growth in sales and home moves. It’s important sellers remain realistic on what they can achieve for their home."
Tom Bill, head of UK residential research at Knight Frank, said: “Housing market activity has rebounded over the last year but the shock of the mini-Budget was still reverberating during the early months of 2023.
"The pipeline of sales has grown since Christmas, largely as positivity from January translates into spring listings. Since then, the prospect of the first rate cut since March 2020 has become more remote with each release of economic data, which means mortgage rates have edged back up and house prices are once again under downward pressure.”
Matt Thompson, head of sales at Chestertons, says: “The uplift in market activity typically associated with spring was slightly delayed this year but became more evident in the course of April.
"Compared to last month, we have seen an increase in the number of London house hunters which has led to sellers feeling more confident that now is the right time to put their property up for sale. Although buyer and seller numbers are both up, demand continues to outweigh supply which still gives sellers in the capital the upper hand during price negotiations.”
Nathan Emerson, CEO of Propertymark comments: “The housing market is still recovering from the economic turbulence of the last three years and is going through a process of correcting itself.
“Homebuyers' confidence and their eagerness to move home is starting to show as more sales complete and our own Housing Insight Reports indicate how positive the market is starting to look, with an 18 per cent increase in new properties coming to the market.
“Approvals for remortgaging also increased, from 30,900 to 37,700 since February, according to the Bank of England’s Money and Credit report, meaning buying and selling a home is now becoming much easier and the easing in house prices is allowing wiggle room in people's affordability.
"As interest rates remain unchanged, we now hope to see them drop soon in order to further incentivise people who are desperate to get onto the housing ladder to make their next move.”
