February UK housing market data has shown the still lingering strong demand for property despite the Bank of England raising the standard base interest rate in both of their last two Monetary Policy Committee (MPC) meetings. According to Rightmove, an online property listing site, asking prices rose by a record 2.3% in February. The increase is the largest in the 20 years of data keeping by Rightmove. 

The average asking price reported was £348,804. This is an annual increase of 9.5%. 

Surprisingly, the increase in asking prices occurred alongside an increase in supply in the housing market. Property listings grew by 11% in February, but the number of people shopping for property grew by 16%. This reveals that demand is still very strong for property and still above the supply in the market.

Some of the demand could involve the motivation to buy before interest rates rise increase again. There had been forecasting for yet another increase by the MPC in their next meeting on 17 March.

The last two meetings increased the standard base rate from almost zero at 0.1% to 0.25% and then to 0.50%. The next increase could be another 0.25% taking the rate to 0.75%. Unfortunately, it is likely there will be even more increases beyond March as inflation reaches levels not seen in decades. It is expected it will reach 7.0% in spring, which is more than triple the level of the target of 2.0% set by the Bank of England.

Rising inflation, rising interest rates, and increased asking prices will put a strain on first time buyers. The average deposit has been reported at being more than half the annual earnings level, and with rising interest rates making borrowing more expensive, it will be very difficult for first time buyers to take their place on the property ladder. 

There are signs that many home movers are returning to the cities after the pandemic has lessened its threat of continued lockdowns. London property prices recorded a 24% year on year increase as well as the highest annual price growth seen in five years.

While many might be returning to the cities, properties near cities with features highly desired at the start of the pandemic such as more space inside and outside are getting the most attention and offers from buyers.

While inflation and rising interest rates are indeed expected to slow down the UK housing market, it could be months before data reveals any cooling off of the market. This is good news for those seeking to sell as well as for homeowners hoping to retain their property values.

Higher property values put homeowners into more favorable choices in remortgaging. The loan to value or LTV level is a strong indicator for lenders as to which remortgage offers are available to a homeowner which translates to the best low interest rate offers.

Experts encourage homeowners to consider a remortgage and to shop online to save money and perhaps secure a fixed rate deal to lock in a low interest rate for years ahead against future expected interest rate hikes.