Home sales fell but average fixed mortgage rates reached a six-month low

Home sales fell by about a fifth (18%) in February 2023 compared to the same month a year earlier, in signs of a slowdown in the housing market, according to HM Revenue and Customs (HMRC).

Across the UK, an estimated 90,340 homes were sold in February this year, which is down 4% from January 2023.

HMRC’s report said: “As we approach the end of last year, mortgage and interest rates have gone up, and we’re starting to see the effects of these changes within these statistics.

Seasonally adjusted residential real estate transactions appear lower, indicating a slowdown in the housing market.

The figures were released as online financial information website Moneyfacts said average two- and five-year fixed-rate mortgages fell to six-month lows.

With two-year and five-year average gross fixed rates falling to six-month lows, borrowers who laid out their plans to remortgage at the end of last year may be looking for the latest offers now.

Rachel Springall, Moneyfacts

Mortgage rates jumped after the mini budget last September, with a rise in the Bank of England’s base rate also affecting borrowing costs.

Moneyfacts said the two- and five-year average flat rates now stand at 5.32% and 5.00%, respectively, both at six-month lows.

Rachel Springol, financial expert at Moneyfacts, said: “The average two-year fixed interest rate is 0.32 (percentage point) higher than the equivalent five-year average.

The last time the two-year average fixed rate was much higher than the five-year rate was 15 years ago.

“Rate competition among lenders has centered more on long-term fixed mortgages.

“As the two-year and five-year average gross fixed rates fell to their lowest in six months, borrowers who put their remortgage plans on hold near the end of last year may now consider the latest offers.”

However, the average standard variable rate (SVR), which borrowers end up receiving when the initial mortgage deal ends, has continued to rise.

Moneyfacts said the average SVR at 7.12% is now the highest rate since April 2008, when it was at 7.16%.

About 1,111,110 home sales have been made so far this fiscal year (April 2022 to February 2023), according to HMRC numbers.

This compares to the 1,263,250 home sales that occurred during the same period in the previous year.

There were significant rises in housing transactions during March, June and September 2021, due to increasing numbers of taxpayers temporarily taking advantage of zero rate bands for stamp duty (which apply in England and Northern Ireland) and equivalent taxes in Scotland and Wales.

Nicky Stephenson, managing director at Vine & Country Group of realtors, said of the February home sales figures: “Given the length of time it has taken to complete a property, many of these sales will be entirely agreed upon as mortgage rates rose last fall, which resulted in A number of transactions were halted due to affordability issues.

“While we will continue to see slowing sales compared to 2022 and 2021, both years were notably outliers, driven by the race for space vacations and stamp duty.”

Buyers who were hanging around at the end of 2022 are now steadily back in the market

Carl Howard, Andrews Real Estate Agents

“Swap rates, which underpin the pricing of fixed-rate mortgages, are starting to fall again, and a number of high-profile lenders have lowered fixed rates,” said Mark Harris, CEO of mortgage brokerage SPF Private Clients.

“The turbulence in the fall has given way to increased calm, as inflation appears to have peaked,” said Jason Tepp, CEO of real estate search site OnTheMarket.com.

“Things have improved dramatically over the last couple of months or so,” said Rhys Schofield, managing director at Peak Mortgages and Protection, based in Derbyshire.

“Buyers who were hanging around at the end of 2022 are now steadily returning to the market,” said Carl Howard, CEO of Andrews Estate Agents Group.

“Just in time for the ‘spring bounce’, buyers are seriously renewing their search as more listings enter the market, building momentum for a period of deals and with that, more stability,” said Nick Lemming, chairman of real estate agent Jackson-Stops.

“Internal data across the national network of Jackson-Stops shows a moderate uptick in views, instructions, exchanges and listings per month.”

Ian Mackenzie, chief executive of the Property Experts Syndicate, said: “Inflation remains high and many budgets are so tight that there is limited ability for potential buyers to bid above the asking price. We could see this trend continuing until the cost of living is brought under control.”

“The drop in sales in February has to be seen in the context of a housing market that effectively stalled for the last quarter of 2022 and didn’t kick back in until after Christmas,” said Tom Bell, UK head of residential research at Knight Frank.

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