MortgagesFeb 21 2023

Property transactions get off to slowest start in a decade

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Property transactions get off to slowest start in a decade
'Transaction numbers dipped as buyers waited to see what would happen with mortgage rates' [Darren Staples/Bloomberg]

Property transaction volumes got off to their slowest start in over a decade this year, falling 27 per cent since the end of 2022.

With mortgage interest rates yet to settle as lenders continue to announce cuts daily, many clients and their brokers are still waiting to see where rates could end up.

Data published today (February 21) by HM Revenue & Customs showed that - provisionally - house sales reached just 77,390 on a non-seasonally adjusted basis, the lowest transaction volume for January since 2014.

This figure was also down 7 per cent on January last year.

“Over the past few weeks, the general trend for fixed-rate mortgages has been downwards, with a number of lenders launching sub-4 per cent five-year fixes,” said Mark Harris, chief executive of mortgage broker SPF Private Clients.

“Transaction numbers dipped as buyers waited to see what would happen with mortgage rates.”

At the beginning of this month, HSBC launched a fixed 3.99 per cent interest rate on a five-year mortgage, making it one of the first lenders to launch a sub-4 per cent rate since October.

Others have since followed suit, including fellow high street lender Virgin Money.

The heady days of the peak – where at one point we saw more than 214,000 transactions in a month – are well and truly behind us.Sarah Coles, Hargreaves Lansdown

Harris said borrowers are not necessarily out of the woods just yet. He expects to see pricing go up and down over the next few months with no visible trend.

In the past day, Virgin Money has announced both rate reductions and rate increases, for example.

Harris added that swap rates, which act as leading indicators for pricing fixed-rate mortgages, are “jumping around” with five-year swaps falling as low as 3.25 per cent two weeks ago before jumping back up to 3.75 per cent.

“Borrowers may be tempted to wait for rates to fall further but there is a danger that they might not and trying to predict interest rates can be a dangerous game,” he said.

Month and year

Non-seasonally adjusted

Seasonally adjusted

January 2014

87,280

104,010

January 2015

77,750

94,150

January 2016

84,030

104,100

January 2017

80,710

102,550

January 2018

80,370

99,320

January 2019

78,830

97,340

January 2020

83,840

97,310

January 2021

97,810

118,750

January 2022

83,620

108,080

January 2023 [provisional estimates]

77,390

96,650

Source: HMRC

‘Unlikely to gain momentum for some time’

Spooked by the hike in mortgage rates in the autumn, personal finance head at Hargreaves Lansdown, Sarah Coles, said buyers have “packed up and scarpered”.

Back in September, former chancellor Kwasi Kwarteng announced a sweep of unfunded tax cuts - now nearly all repealed - which sent mortgage rates spiralling.

This meant at the beginning of November, a month after Kwarteng’s "mini" Budget had taken hold, the average two-year mortgage rate had nearly tripled, from 2.38 per cent in January 2022 to 6.47 per cent in November 2022, according to Moneyfacts.

Since November, rates have steadily been cut by lenders as markets settled following the Autumn Budget, but many remain unsure when rates will stop falling.

“We saw the slowest January in 10 years, as the impact of the ‘mini’ Budget fed through into sales figures,” said Coles.

“While there’s some lingering optimism that lower mortgages may tempt some buyers back, the heady days of the peak – where at one point we saw more than 214,000 transactions in a month – are well and truly behind us.

“This end of the year is always pretty slow, but this January, property sales moved at a glacial pace, and they’re unlikely to gain much more momentum for some time to come.”

A RICS Residential Market Survey has charted seven months of falling numbers in agreed sales since June, with sales taking three and a half months to complete.

“Even if buyers have been buoyed by falling mortgage rates in the past few weeks, we’re not going to see any evidence of this until the spring,” said Coles.

Director at Legal & General Mortgage Club, Clare Beardmore, said although recent activity has not been at the sky-high level the housing market has become accustomed to, there is certainly no reason to panic.

“The UK housing market is famed for its resilience,” said Beardmore.

“The pace of lenders beginning to compete on pricing is encouraging buyers to press ahead. Product choice is also improving, with Moneyfacts reporting that available products have now surpassed 4,000 for the first time since August - almost double what it was at the end of October following the ‘mini’ Budget fallout.”

ruby.hinchliffe@ft.com