Residential Market Commentary

CPI rose by 6.8% in the 12 months to July 2023, down from 7.9% in June 2023. The fall in inflation was the result of the effects of the lower utility price cap. With wage growth still running high and services price and core inflation still ‘sticky’, further tightening is likely.

Inflation (including owner occupiers’ housing costs) didn’t outpace earnings in the latest data. Growth in total and regular pay increased in real terms (adjusted for inflation, CPIH) on the year in April to June 2023. Total pay increased by 0.5% and regular pay increased 0.1% (ONS).

In order to control inflation, the Bank of England have been increasing interest rates, reaching 5.25% in August 2023. The residential market is extremely sensitive to interest rate rises and as a result, mortgage interest rates have increased to around 6% (Bank of England). Monthly mortgage payments have or will become more expensive for many households.

UK GDP is expected to remain subdued, however economic growth for June was robust, growing by 0.5%, after falling by 0.1% in May. This means that the economy grew by 0.2% in the three months to June. Growth in June was partially due to the lack of bank holidays in June compared to May but was buoyed by growth in production output and construction sector growth.

Rising interest rates, high inflation, and a weaker economy have continued to cause a slowdown in housing market activity. Housing market demand is below last year and the pre-pandemic average, and house prices continue to fall, albeit modestly. Monthly increases in sales and mortgage approvals reflect some of the positivity seen earlier in the year, this is expected to fall in the coming months.

Mortgage interest rates increased throughout 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, peaking at 6.28% in November 2022. Rates had improved slightly, declining to 5.14% in April 2023. However, with inflation remaining sticker than expected in May, mortgage rates increased to an average of 6.56% in July 2023. Monthly mortgage payments have or will become more expensive for many households as the wider cost of living crisis continues to bite (Bank of England).

54,662 mortgages were approved in June 2023 (seasonally adjusted). Approvals were 6.9% higher than last month, however they remain 13.5% below the same time last year, and 17.3% below the pre-pandemic average (June 2017 to 2019) (Bank of England).

An estimated 85,870 sales completed in June 2023 (seasonally adjusted). Sales were 6.1% above last month, 15.4% below the same time last year, and 15.5% below pre-pandemic levels (June 2017-2019 average) (HMRC).

Nationwide reported annual house price growth at -3.8% in July 2023, with a seasonally adjusted monthly fall of -0.2%. Halifax reported annual house price growth at -2.4% in July 2023, with a monthly fall of -0.3%.

CPI rose by 7.9% in the 12 months to June 2023, the lowest level since March 2022, and lower than market expectations. Inflation still remains above the Bank of England’s target of 2%, suggesting further tightening is likely.

Inflation continues to outpace earnings. Growth in total and regular pay fell in real terms (adjusted for inflation) on the year in March to May 2023. Total pay fell by 1.2% and regular pay fell by 0.8% (ONS). The cost of living squeeze is continuing to impact buyers and renters affordability.

In order to control inflation, the Bank of England have been increasing interest rates, reaching 5% in June 2023. The residential market is extremely sensitive to interest rate rises and as a result, mortgage interest rates increased throughout 2022. Mortgage interest rates had started to improve, however, inflation remained higher than expected in May, causing mortgage rates to increase again. Monthly mortgage payments have or will increae for many households as the wider cost of living crisis continues to bite.

UK GDP is expected to remain subdued as high inflation reduces households spending power. GDP fell 0.1% in May 2023 (ONS).

Rising interest rates, high inflation, and a weaker economy have continued to cause a slowdown in housing market activity. The early signs of optimism witnessed in Spring are starting to disappear, as further interest rate hikes are expected.

Mortgage interest rates increased throughout 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, peaking at 6.28% in November 2022. Rates had improved slightly, declining to 5.14% in April 2023.  Mortgage interest rates had started to improve, however, inflation remained higher than expected in May, causing mortgage rates to increase again. Average rates were 5.84% in June 2023. Monthly mortgage payments have or will become more expensive for many households as the wider cost of living crisis continues to bite (Bank of England).

50,524 mortgages were approved in May 2023 (seasonally adjusted). Approvals were 3.1% higher than last month, 24% below the same time last year, and 23% below the pre-pandemic average (May 2017 to 2019) (Bank of England).

An estimated 80,020 sales completed in May 2023 (seasonally adjusted). Sales were 3% below last month, 27% below the same time last year, and 20% below pre-pandemic levels (May 2017-2019 average) (HMRC). 

Nationwide reported annual house price growth at -3.5% in June 2023, remaining broadly flat over the last month. Halifax reported annual house price growth at -2.6% in June 2023, also remaining broadly flat over the last month. 

Annual CPI improved in April 2023, falling to 8.7%, down from 10.1% last month. However, the fall in inflation was smaller than expected and core inflation continued to increase.

Earnings (average regular pay) increased more than expected in February to April 2023, increasing by 7.2%. Adjusted for inflation, regular pay fell by 1.3% from February to April 2023 (ONS). The cost of living squeeze is impacting affordability for buyers and renters.

In order to control inflation, the Bank of England has been increasing interest rates, reaching 4.50% in May 2023. The residential market is extremely sensitive to interest rate rises and as a result, mortgage interest rates increased throughout 2022. Mortgage interest rates had started to improve, however, with inflation remaining higher than expected and wages increasing more than predicted, further mortgage rate rises have begun. Monthly mortgage payments have or will become more expensive for many households as the wider cost of living crisis continues to bite.

UK GDP is expected to remain subdued as high inflation reduces households spending power. GDP is estimated to have fallen 0.3% in March 2023 (ONS).

Rising interest rates, high inflation, and a weaker economy have continued to cause a slowdown in housing market activity. The early signs of optimism witnessed last month seem to have reduced in recent weeks as further interest rate hikes are expected.

Mortgage interest rates increased throughout 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, peaking at 6.28% in November 2022. Rates had improved slightly, declining to 5.1% in April 2023. However, with inflation remaining higher than expected and wages growing more than predicted, further interest rate rises are anticipated. This has caused lenders to increase mortgage interest rates again and remove some mortgage products from the market. This can already be seen in the uptick in mortgage rates in May 2023 (Bank of England).

48,690 mortgages were approved in April 2023 (seasonally adjusted), 5.4% lower than last month, 26% below the same time last year, and 25.5% below the pre-pandemic average (April 2017-2019 average) (Bank of England).

An estimated 82,120 sales were completed in April 2023 (seasonally adjusted). Sales were 7.9% below last month, 25.1% below the same time last year and 18.3% below pre-pandemic levels (April 2017-2019 average) (HMRC).

Nationwide reported a 0.1% monthly fall in house prices in May 2023, following positive growth last month. Annual house price growth fell to -3.4%. Halifax reported no monthly movement in house prices in May 2023. Annual house price growth entered negative territory, with a 1% fall, the first annual decline since December 2012.

Annual CPI improved in April 2023, falling to 8.7%, down from 10.1% last month. However, the fall in inflation was smaller than expected and core inflation continued to increase.

Inflation continued to outpace earnings. Growth in total and regular pay fell in real terms (adjusted for inflation) on the year in January to March 2023. Total pay fell by 3.0% and regular pay fell by 2.0%. The cost of living squeeze is impacting affordability for buyers and renters.

In order to control inflation, the Bank of England have been increasing interest rates, reaching 4.50% in May 2023. The residential market is extremely sensitive to interest rate rises and as a result, mortgage interest rates increased throughout 2022. Mortgage rates have improved slightly, but monthly mortgage payments have or will still become more expensive for many households.

UK GDP is expected to remain subdued as high inflation reduces households spending power. GDP is estimated to have fallen 0.3% in March 2023 (ONS).

Rising interest rates, high inflation, and a weaker economy have caused a slowdown in housing market activity. However, there are some early signs of optimism in the market.

Mortgage interest rates increased throughout 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, peaking at 6.28% in November 2022. Rates have improved slightly, declining to 5.2% in April 2023 (Bank of England).

52,011 mortgages were approved in March 2023 (seasonally adjusted), 17.9% higher than last month. However, mortgage approvals remained 25.5% below the same time last year and 19.4% below the pre-pandemic average (March 2017-2019 average) (Bank of England).

An estimated 89,560 sales completed in March 2023 (seasonally adjusted). Sales were 1.3% above last month, however they remained 18.9% below the same time last year and 8.9% below pre-pandemic levels (March 2017-2019 average) (HMRC).

Nationwide reported a 0.5% increase in house prices in April 2023, following seven consecutive falls. Annual house price growth improved, with -2.7% growth in April 2023, up from -3.1% last month. Halifax reported annual house price growth slowing to 0.1% in April 2023, following a 0.3% monthly decline.

CPI rose by 10.1% in the 12 months to March 2023, down from 10.4% in February 2023. Inflation continued to outpace earnings. Growth in total and regular pay fell in real terms (adjusted for inflation) on the year in December 2022 to February 2023. Total pay fell by 3.0% and regular pay fell by 2.3% (ONS). The cost of living squeeze is impacting affordability for buyers and renters.  


In order to control inflation, the Bank of England have been increasing interest rates, reaching 4.25% in March 2023. The residential market is extremely sensitive to interest rate rises and as a result, mortgage interest rates increased throughout 2022. Monthly mortgage payments have or will become more expensive for many households. 

UK GDP is expected to remain subdued as high inflation reduces households spending power. Monthly GDP is estimated to have shown no growth in February 2023 and to have grown 0.1% in the three months to February 2023 (ONS). 

Housing market activity has slowed, as rising interest rates, high inflation, and a weaker economy has impacted buyers’ confidence. However, there are some early signs of transactions and mortgage approvals picking up. 

Mortgage interest rates increased throughout 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, peaking at 6.28% in November 2022. Rates have improved slightly, declining to 5.3% in March 2023. Monthly mortgage payments have or will become more expensive for many households ( Bank of England).

43,536 mortgages were approved in February 2023, 9.8% higher than last month, suggesting the slowdown may be stabilising. However, mortgage approvals remained 37% below last year and 33.2% below the pre-pandemic average (February 2017-2019 average) ( Bank of England ).

SALES

An estimated 76,920 sales completed in February 2023. Sales were 1.8% above last month, however they remained  18.2% below the same time last year and 6.6% below pre-pandemic levels (February 2017-2019 average) ( HMRC).

Nationwide reported annual house price growth at -3.1% in March 2023, the largest annual decline since July 2009. Average house prices are now 6.1% below the August 2022 peak. However, the Halifax house price index is more positive, with annual house price growth slowing to 1.6% in March 2023.

Housing market activity in the UK has slowed, as rising interest rates, high inflation, and a weaker economy impact buyers’ confidence.

In February 2023, buyer demand remained 8% above pre-pandemic levels. However demand was 51% lower than last year (Zoopla). Mortgage approvals have slowed, with 40% fewer approved in January 2023 than the pre-pandemic average (Bank of England). Sales are starting to slow, with a monthly fall of 27% in January 2023. Sales are still only 3% lower than the pre-pandemic average (HMRC). February 2023 saw house prices experience their first annual decline since June 2020, with a 1.1% annual fall (Nationwide).

The residential market is extremely sensitive to interest rate rises and as a result, we have seen mortgage interest rates increase throughout 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, peaking at 6.28% in November 2022. Rates have improved, declining to 5.38% in February 2023 (Bank of England).

39,637 mortgages were approved in January 2023. This is 2.2% below last month and 40.2% below the pre-pandemic average (January 2017-2019 average) (Bank of England).

An estimated 77,390 sales completed in January 2023. Sales were 27.5% below last month and 3.2% below pre-pandemic levels (January 2017-2019 average). (HMRC).

Nationwide reported annual house price growth at -1.1% in February 2023, the first annual decline since June 2020. Prices fell by 0.5% month on month. Average house prices are now 6.0% below the August 2022 peak. However, the Halifax External Link house price index is more positive, with annual growth in February 2023 at 2.1%.

A weaker economy, rising interest rates and high inflation have continued to impact buyers’ confidence. Market indicators are already showing a slowdown in housing market activity.

Mortgage approvals in December 2022 were 45% below the pre-pandemic average (Bank of England External Link). Sales in December were 3% lower than last month but remain above pre-pandemic levels (HMRC External Link). House prices in January 2023 were 5.6% below the August 2022 peak (Nationwide External Link). However, buyer demand is looking more positive, as Zoopla External Link reported recovery in January 2023, with demand in line with 2018 and 10% higher than 2019.

Over the next few months, we will start to see whether buyers’ confidence has returned, and households are getting used to the current economic situation.

The residential market is extremely sensitive to interest rate rises and as a result, we have seen mortgage interest rates increase throughout 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, peaking at 6.25% in November 2022. Rates have improved, declining to 5.72% in January 2023 (Bank of England).

35,612 mortgages were approved in December 2022. This is 23% below last month and 45% below the pre-pandemic average (December 2017-2019 average) (Bank of England).

An estimated 108,960 sales completed in December 2022. Sales were 2.6% below last month but remain 6.4% above pre-pandemic levels (December 2017-2019 average) (HMRC). These sales will mostly reflect transactions agreed several months ago.

Nationwide External Link reported annual house price growth at 1.1% in January 2023. Prices fell by 0.6% month on month, the fifth consecutive monthly decline. Average house prices are now 5.6% below the August 2022 peak.

A weaker economy, rising interest rates and high inflation have continued to impact buyers’ confidence. Market indicators are already showing a slowdown in housing market activity. Buyer demand in December 2022 was down 50% on last year (Zoopla External Link), mortgage approvals fell 20% between October and November 2022, with the lowest number of approvals since June 2020 (Bank of England External Link), and house prices are falling. According to both the Nationwide External Link and Halifax External Link house price indices, prices have experienced monthly declines for four consecutive months.

Buyers’ confidence is expected to remain subdued throughout 2023, with a continued slowdown in housing market activity anticipated.

The residential market is extremely sensitive to interest rate rises and as a result, we have seen mortgage interest rates increase throughout 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, peaking at 6.25% in November 2022. Rates improved in December 2022, declining to 5.96% (Bank of England).

In November 2022, 46,075 mortgages were approved, the lowest number of approvals since June 2020. This is 20.4% below last month and 29.7% below the pre-pandemic average (November 2017-2019 average).

In An estimated 114,200 sales were completed in November 2022. Sales were 4.3% above last month and 2.9% above pre-pandemic levels (November 2017-2019 average). These sales will mostly reflect transactions agreed several months ago (HMRC).

Nationwide reported annual house price growth of 2.8% in December 2022, a slowdown from November 2022 (4.4%). Prices fell by 0.1% month on month, the fourth consecutive monthly decline. Halifax also reported monthly declines for the fourth consecutive month.

A variety of issues have shook the UK economy throughout 2022. Inflation has soared, and two changes of Prime Minister have resulted in an extended period of uncertainty in fiscal and monetary policy. In addition, there have been ongoing concerns around the cost of living, labour shortages and the Russian invasion of Ukraine.

Inflation has continued to rise throughout 2022, with the CPI increasing from 5.5% in January to 11.1% by October (ONS). In order to control inflation, the Bank of England increased interest rates. The first hike of 2022 was in February, when interest rates were increased from 0.25% to 0.5%. By November, the interest rate was 3.00%.

The residential market is extremely sensitive to interest rate rises and as a result, we have seen mortgage rates increase in 2022. For example, a 2-year fixed mortgage rate on a 90% LTV was 1.95% in January 2022, in November 2022, this stood at 6.25% (Bank of England). However, there was little growth between October and November (6.22% to 6.25%).

The impacts of rising mortgage rates are starting to be felt across the housing market.

In November 2022, Zoopla reported buyer demand 47% lower than the same period last year.

58,977 mortgages were approved in October 2022. This is 10.6% below last month and 11.7% below the pre-pandemic average (Bank of England).

An estimated 110,850 sales completed in October 2022. Sales were 3.1% below last month but remained 2.7% above pre-pandemic levels (HMRC).

According to Nationwide, house prices experienced a 1.4% monthly decline in November 2022 and annual house price growth fell to 4.4%, a slowdown on 7.2% in October 2022.

A slowdown in the housing market is expected in 2023 as a weaker economy and rising interest rates continue to impact buyers.

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The Bank of England raised interest rates by 0.75% to 3.00% on 3rd November 2022 as it battles to control inflation.

The residential market is sensitive to interest rate rises and over the last couple of months this has had a large impact on the mortgage market. A two-year fixed mortgage on a 90% LTV stood at 3.9% in August 2022, this increased to 4.5% in September 2022 and by October 2022 this was 6.2% (Bank of England)

We are already starting to see the impact this has on the housing market, with buyer demand in October 2022 down 16% on the 5-year average (Zoopla).

In September 2022, 66,800 mortgages were approved, a 10% monthly decline and further evidence that the market is cooling. However, approvals are still in line with pre-pandemic levels (Bank of England).

An estimated 112,370 sales completed in September 2022. Transactions were 11% above the pre-pandemic average and the same level as last month (HMRC). These sales are likely to reflect mortgage offers agreed several months ago.

House price growth in October slowed, with annual change at 7.2%, down from 9.5% in September. Month-on-month prices fell 0.9%, the first fall since July 2021 (Nationwide).

Over the next few months, we will get a better picture of the impact of mortgage rate rises on the sales market. We will also start to see the consequences the end of Help to Buy applications has on the new build sales market.

Help to Buy was a government scheme which helped buyers (first-time buyers only from April 2021) to purchase a property with just a 5% deposit. The government provided an equity loan of up to 40% in London and 20% outside of London. Since the scheme began in April 2013, it has helped 361,075 buyers. Help to Buy registrations closed on 31st October 2022. Deposit Unlock, First Homes and Shared Ownership are set to fill the gap, but with rising mortgage rates, and fewer low deposit mortgage products available, first-time buyers may struggle to purchase their first home.