The housing market is stuck in the doldrums after a long run-up in borrowing costs and while the Bank of England paused interest rate hikes last month, resulting in a fall in mortgage borrowing rates, affordability remains stretched, and that is preventing many people from buying property.
The situation is not helped by the fact that lenders are expected to curb the availability of mortgages in the next three months, as revealed in a Bank of England survey yesterday.
The BoE’s quarterly Credit Conditions Survey also showed lenders thought defaults on secured loans and on credit cards and other loans would increase.
Leaf said: “Our offices are finding lower mortgage rates are helping to generate more viewings, particularly for smaller family houses, but they are not falling fast enough yet to make a significant difference to sluggish activity.
“However, buyers are not having it all their own way. Bearing in mind approximately four out of five sellers are also trying to purchase, most are resisting attempts to make any more than modest price reductions to avoid chains collapsing.
“Looking forward, there is optimism that the cost of living – including mortgage rates – will bottom out shortly and encourage more effective demand in the early part of 2024.”
The latest data from Royal Institution of Chartered Surveyors (RICS) this week showed that housing demand is still weak as mortgage affordability remains ‘stretched’.
According to RICS’ monthly UK Residential Market Survey, more surveyors reported a fall than a rise in new buyer enquiries in September, with a net reading of –39%, while agreed sales stood at –37%.
Weak demand is placing downward pressure on house prices.
The Royal Institution of Chartered Surveyors (RICS) house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in house prices, edged down to -69 after August’s sharp drop to -68.
Tarrant Parsons, senior economist at RICS, said subdued buyer activity reflected how the higher cost of mortgage borrowing was likely to remain a challenge for many households.
“Although the decision to pause monetary policy tightening a few weeks ago provided a glimmer of relief for the market, interest rates are likely now set to remain on hold for a prolonged period,” Parsons said.
“It appears there is little prospect of trends deviating much from the recent picture in the immediate future. That said, the outlook a little further ahead has improved slightly.”
By contrast, the rental market is booming with RICS’ demand balance standing at +43 while listings were down at -24, reflecting the lack of available properties.
Respondents to the survey predicted growth of almost 5% in the price of rents over the next 12 months.
Rents are booming but are portfolios shrinking? Alot of property on rightmove with no furniture..( x rental homes)
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