A passerby looks at residential properties for sale in the window of an estate agent in Windsor, west London.
Justin Tallis | AFP | Getty Images
LONDON – Data showed that lower mortgage interest rates led to a slight rise in the UK housing market, after the pace of home sales increased last month.
Agreed home sales rose 25% year-on-year in the four weeks to September 22, marking the fastest pace of growth since spring 2021, “as households who had delayed moving decisions over the past two years return to the market,” according to research published by the property portal. Zoopla on Thursday.
Home buyer inquiries also increased 26% annually during the same period, data shows.
Shares of house building companies in the United Kingdom Taylor Wimpey and Barat developments Both rose more than 2.1% after the data was released.
It comes as house prices rose at their fastest pace in almost two years in September, according to Nationwide, rising 3.2% year-on-year from 2.4% in August, when lenders began cutting borrowing costs in response to the Bank of England's first initiative. Lowering interest rates in more than four years.
Mortgage rates have now fallen to a five-year average of 4.57%, down from 5.53% last year, according to the latest data compiled by property portal Rightmove. Some interest rates on such products have fallen to 3.7%, which is well below the Bank of England's key interest rate of 5%.
“Lower mortgage rates are providing a much-needed confidence boost for homeowners, many of whom have sat on the sidelines for the past two years,” Richard Donnell, CEO at Zoopla, said in the report.
Mortgage approvals rose in August to their highest level in two years, the Bank of England said on Monday.
Market watchers are now awaiting the Bank of England's November 7 meeting for further action on borrowing costs, with Governor Andrew Bailey telling The Guardian on Thursday that the bank could be “a bit more aggressive” on interest rate cuts if inflation data continues to be good.
Price growth varies with budget in mind
House price growth was most pronounced in Northern Ireland (8.6%) and Scotland (4.3%) on a quarter-on-quarter basis, while the north of England outperformed the south, according to Nationwide data. However, London remained the best performing southern region, achieving price growth of 2%.
However, apartment sales are still lagging in the post-pandemic “race for space,” noted Robert Gardner, chief economist at Nationwide.
More of these shares have come onto the market, as landlords look to sell their buy-to-let properties ahead of tax rises expected in the Labor government's upcoming Autumn Budget on October 30.
This is likely to keep price growth under control over the coming months, as more second property owners come into the market, Donnell said.
“Speculation about potential tax changes in the Budget and the impact of previous tax changes continues to drive growth in the number of homes for sale. We are still in a buyers' market and the increased choice of homes for sale will keep house price inflation at 2025,” he noted.
Finance Minister Rachel Reeves suggested she would likely have to raise taxes after discovering a £22 billion ($29 billion) “black hole” in the public finances.
After excluding changes to income tax, National Insurance Social Security payments, VAT (sales tax), and increases in capital gains tax and inheritance tax – both of which affect property sales – remain on the table.
Meanwhile, potential changes to the contentious tax status of non-resident countries are also stimulating seller activity at the top end of the market, as wealthy UK residents consider relocating to other lower tax locations.
