Buying and selling your home

Residential market improves as demand and mortgage rates align

Written by Anne Elliss on 16th October 2024 | 4 minute read

Improving conditions in the residential market

According to Savills, activity in the residential property market is picking up as house prices continue to show modest growth.

In August, mortgage approvals were only 3% below pre-pandemic levels. In September, sales agreed and new instructions were 8% and 9% above their respective 2017-2019 averages, highlighting that supply and demand are growing together.

The boost in market activity coincides with a fall in mortgage rates – in August 2023, the average rate for a two-year fixed mortgage with a 75% loan to value (LTV) was 6.2%. In August 2024, this lowered to 4.8%.

Although conditions are improving, house price growth is expected to be limited due to the increased cost of living over recent years. Plus, general market growth will depend on Autumn Budget announcements and any potential reductions to Bank Rate and inflation.

Rental market update

The latest report from Zoopla has highlighted that rental inflation is slowing but tenant demand remains high.

Over the last year, rents have risen by 5.4%; while this is a significant increase, it is the slowest pace of growth in three years. Rental inflation is not slowing at the same pace as household inflation and earnings because tenant demand continues to outweigh the supply of rental properties. There are currently 25% fewer rental homes available than in 2019. This is partly due to landlords deciding to sell—a trend that could continue depending on what tax changes the Labour government may have in store.

September data shows that the average rent for new UK lets was £1,245 per month, but the cost varies significantly from region to region. According to Rightmove, the cheapest UK city for renters is Carlisle, whose average rent is £791 – 41% below the national average. Following closely behind is Hull (£804), Sunderland (£807) and Stoke-on-Trent (£863).

UK Finance’s recommendations for the Autumn Budget

UK Finance has made a series of recommendations to the Labour Party ahead of the Autumn Budget.

The trade association has suggested that the government introduce a Stamp Duty rebate scheme to motivate homeowners to upgrade their homes' energy efficiency. The body also recommended that Stamp Duty bands be raised annually to correlate with increases in the average house price.

The Stamp Duty threshold for first-time buyers is set to be reduced in March 2025, meaning the tax will be payable when purchasing a property worth £300,000 or more. But UK Finance has urged the Labour Party to keep the threshold at the current higher limit of £425,000.

Chief Executive of UK Finance, David Postings, commented, “We have called on the government to not only introduce measures to bolster growth, but also a range of ideas to help support households and businesses up and down the country.”

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

All details are correct at the time of writing (16 October 2024)

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