Home buyers have returned to the housing market and the average house prices have had the strongest start to the year since 2020. With a greater supply of available properties coming to the market, and lower interest rates than would have been expected, home buyers are showing up and taking advantage of the current opportunities. While there is a typical uptick to the housing market following a slow buying period of the holiday season, the data has shown hopeful home buyers are eager to climb the property ladder and did at a greater pace than usual.

According to the online property listing website, Rightmove, between 3 December and 6 January, the increase in the average asking price was more than double the average normally reported for the same time of year. The number of agreed sales for the first week of January was 20% higher compared to the same week last year with buyer demand at an increase of 5.0%.

During the pandemic, the demand for housing soared, and the highest record average house price was replaced several times over with a new record-breaking level. According to official data the increase amounted to more than 25%.

As mentioned, there is a greater supply of properties with the volume of new homes on the market increasing by 15%. 

With this greater supply of available properties grabbing the attention of home buyers, there is also the unexpected competitive lending market that has pushed interest rate offers to below the base rate of the Bank of England.

The current standard base interest rate is 5.25%, The rate held steady for the last three meetings of the Monetary Policy Committee (MPC) due to the positive response of the inflation rate drawing closer to the target rate of 2.0%. 

As inflation dropped, and perhaps in anticipation of the MPC not only abandoning any further rate hike plans but possibly cutting the rate, lenders felt less risk in lending and cut their own rates. A rate cutting war began with one after another taking their best offers below the base rate of 5.25%. Some have almost neared the 4.0% level.

The average five-year fixed rate mortgage in July 2023 was 6.11%, and it is now 4.86%. 

With optimistic reports on inflation, a possible rate cut sooner rather than later in the year, and with more properties on the market, home buyers took notice and are taking advantage of the opportunities that have not been this positive for them in months.

Tim Bannister, director of property science at Rightmove, remarked, “For now, the data at the start of 2024 points to building momentum, and reasons for growing market optimism.”

However, asking prices in Rightmove's January period are still 0.7% lower than the year before.

Halifax also reported an increase in buyer demand, with a 1.1% monthly house price increase in December which was the first annual rise in eight months.

The increase in the average asking price reported by Rightmove grew month on month to £359,748.

Due to lower interest rates being offered despite the base rate being held steady by the MPC, a lot could depend on the next MPC meeting to keep lenders content with their current risk in lending so they maintain current offerings even if the base rate doesn’t change.

But, if the meeting scheduled for 1 February, the first MPC meeting of the year, should end with a steady rate versus a rate cut, it might signal an end to the current competitive lending environment. 

There is not an expectation of any rate hike, as it would likely only occur if inflation is reported in a long stall or climbing. Holding steady is the most likely scenario for the meeting, and perhaps the wait and see will be enough for home buyers and homeowners, to take advantage of what lenders are offering now.