More home sales agreed as confidence improves

Activity in the housing market is continuing to pick up, with more sellers listing homes for sale and more sales being agreed.

With interest rates finally coming down and mortgage costs easing, there are positive signs for both buyers and sellers.

Increasing supply of homes for sale

The UK property market has seen a shortage of available homes for some time, contributing to the slowdown in property buying and selling.

But the situation is improving: the average estate agent now has 33 homes for sale, according to property website Zoopla. This is 16% higher than a year ago.

In fact, there are more homes for sale than at any point in the last six years. This is expanding choice for home buyers and supporting more sales, while also keeping price inflation in check.

Rise in sales, with price achieved closer to asking price

The greater supply has resulted in a 16% increase in the number of sales agreed compared with a year ago, with sales rising in all regions and countries of the UK.

Sales agreed are now 22% above pre-pandemic levels, Zoopla found.

Amid strengthened confidence in the market, home buyers are paying a greater proportion of the asking price than they were last year. On average buyers are currently paying 96.8% of the asking price, up from 95.6% last October when higher mortgage rates hit demand.

In value terms, this equates to homes selling for an average of £16,600 below their asking price in June 2024, compared with £23,000 below the asking price in October 2023.

‘Modest upward trend’ predicted for house prices

House prices are expected to gradually increase over the rest of this year.

The latest monthly data from Halifax showed that house prices rose in July after three relatively flat months, increasing by 0.8% compared to June. On an annual basis prices were 2.3% higher.

Amanda Bryden, head of mortgages at Halifax, said that the recent base rate cut to 5% and reductions in mortgage rates were “encouraging” for those looking to buy their first home, move along the housing ladder or remortgage.

“Against the backdrop of lower mortgage rates and potential further base rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year,” Bryden added.

Increase in monthly mortgage repayments

Although mortgage costs are coming down, the affordability of monthly repayments remains a challenge for many buyers.

Since the Bank of England’s first base rate increase in December 2021, the average asking price for a home has gone up by 10% while the average cost of a monthly mortgage repayment has risen by 46%, according to a new analysis by property website Rightmove.

As a result, the average home buyer is paying £581 more in monthly mortgage costs — from £1,258 at the end of 2021 to £1,839 today.

For first-time buyers, monthly repayments have gone up from an average of £781 to £1,122 over the same period — an increase of £341.

The report found that the average rate on a five-year fixed, 15% deposit mortgage is now 4.91%, compared with 2.23% in 2021.

Rightmove mortgage expert Matt Smith said that although people looking to take out a mortgage soon shouldn’t expect to see “drastically lower mortgage rates” following the cut in the base rate, the downward trend is likely to continue.

“This sets us up for hopefully further cuts to come, and when we have seen further reductions to the base rate, people should really start to see the impact,” Smith added. “However, it’s important to keep in mind that mortgage rates are widely expected to eventually settle at higher levels than previously, with the market view that the base rate may eventually fall to about 3.25%.”