Buyer confidence in the housing market is on the rise, driven by a pause in bank rate increases and the prospect of lower mortgage rates. Since the August bank holiday, estate agents have observed a 12% increase in enquiries on homes for sale. Although this resurgence comes from a lower base, with buyer demand still down 33% compared to the previous year, it is encouraging to see demand now tracking 2019 levels. Improved consumer confidence, currently at a two-year high, plays a significant role in this positive trend.
This is particularly uplifting news for sellers in southern England and London, regions that had been grappling with declining demand due to rising mortgage rates. In these areas, buyer numbers have surged by 19% in the South East and 16% in London. Additionally, the number of new sales agreed is now closely aligned with 2019 levels. As supply levels return to the market, buyers have more choices to consider when looking for their dream home.
The outlook for lower mortgage rates has provided a substantial boost to buyer confidence. It's widely anticipated that rates closer to 4% will attract more buyers into the market, supporting sales and pricing levels. Consistently high mortgage rates above 5% can lead to lower sales and year-on-year price declines.
Buyers remain steadfast in their aspirations and aren't willing to compromise on their next home's priorities. Many are exploring longer mortgage terms to ensure they find a property that aligns with their long-term needs. As the market becomes more favourable, these determined buyers are holding out for the homes they truly desire.
House prices have experienced a 0.5% decline over the past year, marking the first annual decrease in over a decade since June 2012. While this trend is more pronounced in southern England, with its pricier homes, Scotland stands out with annual house price growth running at +1.6%. The decline in house prices is expected to continue throughout 2023, with an estimated 2-3% drop compared to 2022. Despite these adjustments, house prices remain 17% higher than they were at the beginning of 2020.
In the coming months, the anticipation of lower mortgage rates will be key to improving buyer affordability. The prospect of more accessible rates is likely to have a positive impact on the housing market, fostering growth and providing more opportunities for prospective homeowners.