Another indication that things are looking up for the property market is the sharp increase in mortgage approvals in March.
Mortgage approvals for home purchases increased “significantly” to 52,000 in March from 44,100 in February, according to data issued today by the Bank of England.
According to Lucian Cook, head of residential research at Savills, the capacity to more effectively budget for future mortgage outgoings has “brought buyers back to the housing market” and is driving growth.
According to the most recent research conducted by Savills on buyers and sellers, both short- and long-term commitment to moving has dramatically increased. A net balance of 28%, up from a net of 7% in November 2022, have indicated that they plan to relocate over the next three to six months.
Nevertheless, he continued, “ongoing inflationary pressures and the likelihood of further rate increases mean cash and equity rich buyers are likely to remain in pole position over the course of the next six months.
Effects of a mini budget shock on mortgages
Figures also revealed that mortgage lending to individuals decreased from a net flow of £0.7 billion in February to a net zero in March, the lowest level of net borrowing since June 2011, when the amount was £0.3 billion. This information comes as the fallout from September’s mini budget starts to fade.
In addition, the average interest rate on new mortgages increased by 17 basis points to 4.41 percent in March.
According to Mark Harris, chief executive of the mortgage broker at SPF Private Clients, “with mortgage approvals picking up again, it appears that buyers are shaking off recent concerns about the wider economy and getting on with moving.”
The worst of the suffering might not be over, he said, since another quarter-point rate increase is anticipated next week as inflation turns out to be more obstinate than the Bank of England had anticipated.
“Lenders have removed their market-leading lower loan-to-value products as a result of the recent rise in swap rates, which support the pricing of fixed-rate mortgages, and all the major players have increased pricing by 30 basis points.”
But he said, “Swaps have plateaued over the last few days and started to edge downward, so if this trend continues, we expect sub-4% pricing to return once more.”
Increased housing market
Even though inflation is still above 10%, other reports made public this week suggested that the real estate market was beginning to stabilise.
According to data from Nationwide, property prices increased by 0.5% in April. Prices are still 4% below their August 2022 top, though.
Tom Bill, head of UK residential research at Knight Frank, stated that the property market in the UK “continues its convincing rebound following the chaos of the mini-budget.”
“Price decreases seem to be bottoming out, and January was undoubtedly the low point for transactions. Due to the return of stability in the banking sector, buyers have come to accept the new normal for mortgage rates.
“We expect sales activity to be solid but not particularly spectacular this year,” he stated, citing savings amassed during the pandemic, record-high levels of house equity, and a strong labour market as positive factors.
Properties that meet all the criteria will retain their value, but as the epidemic froth starts to fade, asking prices will be under pressure.