Mortgage Rate Drops Boosts Property Demand

by | Monday 2nd Oct 2023 | Mortgage News

In an interesting turn of events, the United Kingdom’s property market seems to be seeing a surge in buyer demand, fuelled by significant recent mortgage rate drops. Zoopla’s latest house price index reveals that buyer demand increased by an impressive 12% in September 2023 despite house prices continuing to drop. It also seems that this surge in demand is not limited to a specific region, spanning across the entire UK, potentially reflecting improved buyer confidence in the market and a return to heightened interest in homeownership.

Mortgage Rate Drops Spur Buyer Demand Across UK

One of the standout findings of Zoopla’s report is the widespread increase in buyer demand throughout the UK. Enquiries to estate agents have increased by 12% since the August bank holiday weekend. While some of this uptick may be attributed to general seasonal enquiry trends (e.g. people looking for new homes for Christmas etc.), it is clear that the improved consumer confidence and reduced mortgage rates have played significant roles in driving this surge in interest. According to Zoopla’s report, the South East and London have witnessed particularly impressive increases in demand which is not necessarily something that we would have predicted considering the cost of living crisis is still in full force. Over the past three weeks, buyer demand in the South East has surged by 19%, while London has experienced a 16% increase. These regions, which are often seen as property hotspots, are now benefiting from increased interest as a result of more favourable market conditions (inflation reducing and the base rate being frozen for the time being).

A Stronger Buyers Market?

The UK property market is rapidly evolving into a strong buyers’ market, with ample opportunities for those looking to purchase a home. Compared to September 2021, there are now 80% more homes available for sale. This increase in housing inventory provides buyers with a wider selection of properties to choose from, further contributing to the heightened demand.

One notable trend that Zoopla has identified in their house price index is the average discount to asking price for newly agreed sales. Currently, the average discount stands at 4.2% or £12,125. However, it’s important to note that this figure is influenced by London and the South East, where discounts are even more substantial at 4.8%. In contrast, the rest of the UK experiences an average discount of 2.8%. This variation suggests that buyers in London and the South East are currently benefiting the most from the buyer-friendly market conditions. Which would explain the large increase in enquiries in London.

Mortgage Rate Drops

While various factors will have undoubtedly contributed to the resurgence of buyer demand, it is safe to say that one of the most significant drivers is the drop in mortgage rates. Lenders across the UK have responded to market conditions by reducing their rates over the past few months. This has made homeownership slightly more accessible and affordable than it was a year ago when lenders started to bump up their rates to 6, 7, and 8% for a broader range of prospective buyers, including first-time buyers and those looking to upgrade their properties. With lower monthly mortgage payments and reduced overall interest costs, many potential buyers or borrowers who were previously on the fence about entering the property market have now been encouraged to take the leap.

The Future

As we look ahead, the UK property market appears to be in the midst of a transformation. Only time will tell what exactly it will transform in to! The surge in buyer demand identified by Zoopla in their September 2023 house price index, driven by favourable mortgage rates, seems to be providing more opportunities for both buyers and sellers. If you or anyone you know is considering buying a property, there is no harm in speaking with a mortgage advisor and an estate agent, simply to see what your options might be. Give our team a call today or send us an email to get the ball rolling. We are here to help.

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If you have any questions about UK mortgage news or or anything you’ve read then please get in touch. We’d love to hear from you.

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