According to HMRC, property transactions have been stable in recent months and are still higher than pre-Covid levels. For example, seasonally adjusted residential transactions amounted to 99,200 in October 2019 and 100,580 the year before.
Non-seasonally adjusted figures showed that residential transactions were 29 per cent higher than October last year, and three per cent down on September.
Although the figures point towards a steady property market despite turbulence in the mortgage sector at the end of September, those in the industry say transaction levels do not reflect what is happening on the ground.
First signs of a slowing market
Richard Pike, chief sales and marketing officer at Phoebus Software, said the non-seasonally adjusted figures – while higher than last year – were showing the first signs of a slowdown in the market.
Pike added: “The fact that mortgage rates have actually come down recently is something that appears to have escaped the notice of the mainstream press. This means that while the perception is that interest rates are rising, confidence is likely to be affected negatively, which may slow the market further.”
Some brokers reported a drop-off in client enquiries.
Riz Malik, director of R3 Mortgages, said: “To quote Björk, the UK housing market is oh, so quiet and oh, so still. The sliver of activity we are seeing is coming from first-time buyers. With the World Cup, miserable weather and a month before everyone shuts down for Christmas, activity levels are likely to be pretty low.”
Lewis Shaw, founder of Riverside Mortgages, said the figures lagged behind economic reality.
He added: “On the front line, it’s now a very different story. The phones have stopped ringing, buyers are holding off, and with the World Cup and Christmas upon us, most people have decided to sit tight and wait until next year.”
Shaw said despite this, he did not believe house prices would drop by 10 or 15 per cent due to waning demand but said asking prices could return to pre-Covid levels.
First-time buyer hesitation
Echoing Malik’s thoughts, some industry figures said much of the continued demand would come from first-time buyers but many were planning to delay purchases.
Andrew Montlake, managing director of Coreco, said: “First-time buyers are still active, and this key demographic is waiting in the wings ready to pounce as prices fall. The fact the mortgage market has now stabilised and that rates are not set to peak as high as we thought has brought some confidence back into the market, despite the predicted long recession that lies ahead.
“After two years of surreal house price growth, some froth had to come off the market and that will drive transaction levels rather than destroy them.”
Samantha Bickford, mortgage specialist at Mortgages with Clarity, said while there was a slowing in transactions, “first-time buyers are still fairly active”. She said the difference was they were not in a hurry to buy due to inflated prices and higher rates.
Bickford added: “Most conversations with clients currently end in them saying they are going to hold off until the New Year to see what’s happening in the market. This is not unusual for this time of year, but is being heavily influenced by the hope that interest rates will start to come down again and mortgages will once again become affordable.
“I am also seeing borrowers avoid using all of their deposit for their purchase, as they are nervous to part with their hard-earned savings by putting all their money into a new purchase, leaving them without an emergency fund. Rather than take on a higher mortgage amount, they are looking for a lower value property, or holding off all together for the time being.”
Housing market proving its strength
Although some industry figures were noting uncertainty among buyers, others said that the housing market had proved its strength in the face of economic uncertainty.
Alex Smith, senior mortgage and protection adviser at Capricorn Financial Consultancy, said: “The robustness of the UK housing market remains.
“Stamp duty cuts first introduced in September and more recently confirmed to remain in place until 2025 have already helped boost buyer confidence in what is an otherwise uncertain environment.”
Mark Harris, chief executive of SPF Private Clients, added: “Transaction numbers are holding up as buyers with good mortgage offers are keen to complete before they expire.
“There is good news for borrowers as swap rates continue their decline, resulting in several lenders repricing their fixed-rate mortgages. We now have five-year fixes starting with a four, rather than a six, and would expect them to go below four per cent by the spring as the cost of funds falls, servicing pressure subsides and lenders attempt to originate new business.”
Lenders keen to write new business
Danny Belton, head of lender relationships at Legal and General Mortgage Club, said the mortgage market “continues to sail relatively steadily through choppy waters”.
He added: “Lenders remain very keen to write new business. Advisers are the crucial connecting piece, matching borrowers with lenders to ensure as many people can achieve their dream of homeownership as possible.
“We have showed time and time again that we can weather the largest economic storms – I don’t expect this one to be any different.”
Mike Scott, chief analyst at Yopa, said sales were 9.4 per cent higher than 2019 which was the most comparable month. He also pointed out that many sales would have been agreed over summer before any market uncertainty.
Scott added: “Nevertheless, they do show that there was no sign of the downturn in activity that was widely anticipated in the second half of this year, even before the interest rate rises, and so they are a positive indicator for the housing market.”
