In a nutshell:
- In 2023, one million residential properties were sold
- On average, house prices decreased by 1.2% across the UK
- The bank rate was increased five times by the Bank of England
- For a two-year fixed rate, mortgage rates topped out at 6.44%
- Standard Variable Rate mortgages reached 8.74%
In 2023, there were five increases in bank interest rates. This led to a peak mortgage rate of 6.44% for a two-year fixed-rate deal with a 75% loan-to-value ratio.
During the first half of 2023, housing prices experienced a decline in the south, while remaining stable in the north where property is typically less expensive.
However, by the end of 2023, house prices started to decrease across all price bands and geographical areas in the UK.
On average, house prices decreased by 1.2% across the whole year.
Changes to bank rates and mortgage rates:
So, what were the five increases experienced by the bank rate in 2023? In both January and June, it increased by 0.5%, whilst in March, May, and August, it increased by 0.25%, meaning that the bank rate increased by 3.5% between the start of the year and early December.
This shift profoundly impacted mortgage rates. The average five-year fixed-rate mortgage increased from 5.05% to 6.37% between January and August. As of December 2023, it currently stands at 5.94%.
The average standard variable rate mortgage has surged to a shocking 8.74%, from 6.61% at the beginning of the year.
The unpredictability of mortgage rates this year resulted in buyers and homeowners flocking to Google with questions about mortgages. One query of this nature was placed every 23 seconds. Or, in other words, 3,757 times a day.
This unsurprisingly had a tangible impact on house sales. Potential buyers found that their budgets decreased by 20%, thanks to the escalation in mortgage costs, affecting housing sales across the UK.
House prices in 2023:
Throughout 2023, house prices fell by 1.2%, on average, across the UK. However, this figure varies by region, so the value of your property could be either down 2.6% or up by 1% depending on where you reside.
The most drastic differences can be seen in the East of England at -2.6%, the Southeast at -2.4%, and London at -2.0%.
Bournemouth, Southampton, and Cambridge are other cities experiencing big drops at -2.6%, -2.3%, and -2.3% respectively.
On the other side of the spectrum, house prices are still rising in Scotland (+1%) and Northern Ireland, particularly Belfast (+2.3%), as of December 2023.
When it comes to seller discounts, the average now sits at 5.5%. This is equivalent to £18,000 off the asking price.
However, despite the falls in house prices across much of the UK, prices are still significantly higher than they were pre-pandemic.
The most popular property types in 2023
Although rising mortgage rates have posed difficulties within the property world, 2023 was not all doom and gloom. One million homes were sold, along with 432,000 rental properties let to tenants.
Terraced houses were the most popular when it came to sales. 140,000 of this property type (including both mid and end-of-terrace) were sold this year.
Semi-detached houses scored a close second, with 130,000 of these properties listed as under offer.
Most terraced and semi-detached houses have three bedrooms, demonstrating that three-bedroom houses are still the most popular among buyers due to their versatility.
Apartments took third place, with 120,000 sold. This was followed by detached homes with 89,000 secured by buyers.
During the pandemic, detached homes were the most popular. This was because everyone was competing for space. However, in 2023 buyers are prioritising affordability over space due to rising mortgage rates. This has also resulted in flats becoming more desirable to first-time buyers.
How long did it take to sell a home in 2023?
In January 2023, it took 36 days on average to sell a home. However, by April, that figure shrunk to only 29 days. In December 2023, it takes approximately 38 days to sell a home.
This might seem strange but when you look at mortgage rate figures over time, it becomes clearer. At the beginning of 2023, mortgage rates were much lower than they were at the end of the previous year, so this encouraged people to take the plunge and buy.
The number of homes that went under offer in 2023 is 16% lower than in the years 2020-2022. However, this figure is 11% greater than the equivalent for 2019.
Unfortunately, inflation stayed high throughout 2023, and mortgage rates snook past 5% again, discouraging a lot of potential buyers.
The rental market in 2023:
Rent prices have been increasing at a disturbing 10% for over 20 consecutive months.
This was even higher in Scotland, where rent prices ballooned at a 12.7% increase.
However, competition for rental properties is still high, coming in at 51% above the 5-year average for the majority of the year.
The competition amongst renters is due to a combination of factors, including a shortage of rental properties and a lack of new supply.
The escalating mortgage costs also resulted in two things for the rental market:
Firstly, landlords began to give up on the business of renting out properties due to decreasing profit margins.
Secondly, potential first-time buyers stayed put in rented accommodation for longer, waiting for mortgage prices to fall again.
Over the last ten years, the average rent cost as a percentage of gross annual income has averaged around 27.2%.
However, in just the last 20 months, rented accommodation is less affordable than ever at 28.4%.
The number of new homes built, along with net new investment for private landlords, is forecasted to stay low as we enter 2024. This is primarily due to greater borrowing costs.
What can I expect for 2024?
The future of the property market in 2024 is still uncertain, but as mentioned earlier, it would appear that mortgage rates are not going to drastically plummet any time soon. However, the slight decrease in house prices across some areas in the UK offers a small glimmer of hope for first-time buyers.
