The housing market slowed in March, and many factors came together to convince homeowners to sit on the sideline and wait. Of course, there were likely many hopeful home buyers shut out of the market due to affordability. According to Nationwide, the average house price declined by 0.2% from February into March. It is the first time a decline has been recorded in three months. The previous two months experienced a 0.7% increase, and with the recent 0.2% decline, the average house price is £261,142.

The previous increases in the housing market were likely generated due to a cut in lender rates. The Bank of England’s Monetary Policy Committee (MPC) did not meet in January, so the rate was held steady from the December meeting. In February, the rate was again voted to hold at 5.25%. However, lenders took their own action and began to cut their rate offers.

Some mortgage deals were offered at interest rates below the base rate. Combined with a greater supply of listed properties on the market, and the unexpected lower deals, hopeful home buyers took advantage of the competitive lending market rather than miss out if it should disappear as soon as it emerged.

In March, the optimism in the economy dampened. Inflation reported for the twelve months to January and offered in February, revealed inflation was still stubbornly sitting at 4.0%. This is double the Bank’s target rate of 2.0%. Also, demand for mortgage lending had grown and there was less need for competitive offers. Lenders began to pull their lowest interest rate deals. In March, as the new inflation report arrived on 20 March and the MPC meeting on 21 March, there were fewer of the below base rate deals on the market and fewer of the lower interest rate deals than weeks earlier.

However, despite the latest data on the decline of the average house prices, it could rebound and regain the current loss. There is usually a boost in the market in the spring season. As people come out of the winter weather, more home shopping occurs and there was plenty of optimistic economic news ending out the month of March leading into April.

The inflation report showed a dip under the months long 4.0% to 3.6%. The MPC voted to keep the rate steady at 5.25%, but for the first time in two years, no member voted for a rate hike. Instead, there was one member voting for a cut to the base rate.

Experts are forecasting a cut in the base rate by June and at the latest in August. A possible three rate cuts of at least 0.25% are expected by the end of the year.

The optimistic news may have been enough for home buyers to choose to sit out and wait on lower interest rates of weeks prior to return. Thus, the subdued data from Nationwide. 

The latest information on the average house price might offer help for buyers as it could serve as a wake-up call to sellers. The boost in the market due to the lower competitive interest rates gave sellers the info they needed to increase asking prices. Now, with house prices declining, it could cause sellers hoping for a quicker sale to offer more competitive pricing.

The MPC will not likely lower the base rate until summer, but it doesn’t mean lenders will wait as well. Lenders will be anxious to grab the attention of borrowers as the expectation for the economy and household budgets becomes more positive. Offerings could become attractive, sellers might become more competitive in their pricing, and home buyers could return to the market. If so, it would boost the housing market and could even do so at a level that could regain the current loss.

House prices remain elevated after the record-breaking highs of the pandemic lifestyle buying frenzy. Interest rates, while remarkedly higher than those available just two years ago, still are incredibly attractive. Lenders creating competitive offers have brought unexpected cuts in borrowing. There is plenty to believe the housing market will rebound in spring and likely will do so quickly.