A rise in buyer demand after the summer lull has been recorded by Zoopla’s latest House Price Index with enquiries to estate agents up 12% since the August Bank Holiday weekend. This is in line with 2019, although 33% lower than a year ago. The uptick in enquiries is partly seasonal, as people return to their homemoving goals when the summer holidays end. But Zoopla says it also reflects that consumer confidence is at a two-year high, boosted by the prospect of lower mortgage rates on the horizon. The latest index also shows more agreed sales this month, matching the levels of 2019. This is supported by a boost in the number of homes for sale to pre-pandemic levels, giving much greater choice for people buying a home.
Mortgage rates remain over 5%, reducing household buying power by 20% compared to early 2022. Despite this knock to affordability, buyers are not compromising on the type of home they’re looking for. Zoopla says that the share of buyer demand by property type and size is virtually the same as a year ago. There’s also been no change to the price bands buyers are interested in. People are overwhelmingly holding out for the sort of home they want, apart from some small regional variations. It seems that people would rather wait for a fall in house prices or mortgage rates than risk moving to the wrong property. This is why Zoopla suggests the number of agreed sales this year will be 20% lower than last year, and mortgaged sales 28% lower. It’s a rational approach – buying a home is a big and expensive life event. Younger buyers are taking longer mortgages to boost their buyer power, so it makes sense to buy a property you’ll be happy with for a decade or longer.
Lower mortgage rates are the key way to improve affordability and buying power in the next 12-18 months – more so than falling house prices. The latest inflation news was better than predicted and the subsequent pause in Bank Rate rises has improved the outlook for mortgage borrowing costs in the coming months. What’s more, the cost of finance to banks for fixed-rate lending has fallen in the last month. This means banks have room to reduce mortgage rates. Zoopla’s view has always been that mortgage rates over 5% mean fewer sales and yearon-year house price falls. The closer mortgage rates get to 4%, the more buyers will come back into the market, supporting sales and pricing.