Property Market Update: May 2024

Welcome to the May edition of the Property Market Update! We've collated information from experts from across the UK to provide you with a comprehensive view of the current market.

Both Halifax and Nationwide, key players in the industry, reported minimal changes to average house prices. Halifax saw a slight increase of +0.4%, while Nationwide experienced a modest decrease of -0.4%.

These stable price trends indicate a tempering in market conditions, with the persistent challenge lying with the high interest rates of new mortgage deals. As of May 1st, the average two-year fixed rate was 5.91%, while the average five-year fixed rate stood at 5.48%. This is up from last month, when they were 5.80% and 5.39% respectively.

Higher interest rates are having the greatest impact on first time buyers. Nationwide’s survey, carried out by Censuswide, found that nearly half (49%) of first time buyers have delayed their plans over the past year, with 41% saying that higher mortgage costs were preventing them from buying.

Rightmove reports that the biggest growth in market activity is taking place with homes at the top of the property ladder. The number of new top-of-the-ladder sellers is up by 18% compared to this time last year and the number of sales being agreed up by 20%.

Average house prices barely budge

In April, national indexes showed little fluctuation in average house prices.

The bank, Halifax, reported that the average UK house was valued at £288,949, with a monthly change of +0.4% Conversely, the building society, Nationwide, reported that the average UK house was valued at £261,142, with a monthly change of -0.4%.

These small fluctuations suggest that house price growth, and more broadly, market growth, is being tempered by the higher interest rates of available mortgage deals.

Asking prices grow, reports Rightmove

Despite the lack of growth in average house prices, the price of new property arriving on market has risen according to Rightmove. The average asking price of new housing stock has risen by +1.1% to £372,324, just short of breaking May’s (2023) record by £540.

Where’s the biggest growth? The biggest houses!

Apparently, this large increase in market activity is taking place with homes at the very top of the property ladder. The number of new sellers in this sector is up by 18% compared to this time last year and the number of sales being agreed up by 20%.

It makes sense. Sellers at these heights aren’t as constrained by the same problems we see with mortgage affordability as first time buyers or second steppers are.

Plus, after months of limited supply, there is now increased choice and demand in this sector.

Mortgage rates increase

Average mortgage rates have risen in May, reports financial information group, Moneyfacts. As of the 1st of May, the average two-year fixed rate is 5.91%, while the average five-year fixed rate stands at 5.48%. These figures are up from 5.8% and 5.39% at the start of April.

With expectations around future changes to the Bank of England’s base rate, average mortgage rates have begun to drift higher and higher.

Despite some adjustments earlier this year, interest rates remain twice as high as they were two years ago. According to Zoopla, there was a -23% drop in home sales as a result of these rate increases in 2023, along with house price falls.

The silver lining

Yes, there is a silver lining. According to the BOE, the number of mortgages approved to finance house purchases increased in March 2024 by +1.4% to 61,325. This is 20.1% higher than the figure reported in March 2023.

This means that while affordability remains a challenge, it’s not getting worse - which means that some of those buyers who were unable to buy a property last year are now able to do so.

House prices and mortgage rates remain key issues for first time buyers

According to a survey by Censuswide (commissioned by Nationwide), nearly half of first time buyers (49%) have delayed their plans over the past year. Among this sample, the most commonly cited reasons for delay were house prices being too expensive and mortgage costs being too high (41%). Notably, over 84% said that the cost of living crisis had affected their plans to buy.

With the value of flats having risen sharply over the first half of the year, we can see that first time buyers are dealing with higher borrowing pressures by settling for smaller properties.

Summary: The waiting game

It feels as if the market is entering a hesitant period. We’re yet to see the direct consequences of falling inflation on the mortgage sector. Until the base rate begins to inch down in the second half of the year, mortgage rates will continue to be a pain for many, especially first time buyers.

With a busy summer ahead, and a General Election to follow, it would be wise for potential sellers to take advantage of the calm before the storm. Make use of the increased activity and always listen to the advice of your estate agent!