Searches on the property portal Rightmove experienced an unusually large spike in the first week of September, with buyer demand increasing by five percent. This marks a notable rise compared to the average increase of just 0.4 percent seen during the same period over the past five years. This uptick in activity occurs amidst a challenging year for the housing market, influenced by higher mortgage rates and broader economic and geopolitical instability.
While overall buyer demand remains lower than in the previous year, the September surge has narrowed that gap. Estate agents have observed an increase in viewing requests and online property views, suggesting a renewed engagement from potential buyers as children return to school. This seasonal shift is a common phenomenon, but the scale of this year's increase stands out.
Regional Demand Increases
Rightmove reported higher buyer demand across all regions of Britain. London led the increase with a nine percent rise, followed closely by the South West of England with an eight percent increase. The West Midlands and North East saw demand grow by approximately seven percent, while the East Midlands and South East of England each experienced a six percent uplift. Demand in the East of England rose by five percent, and in the North West by four percent. Wales saw a three percent increase in buyer demand, and Scotland saw a one percent rise.
Rising Mortgage Rates and Economic Concerns
The housing market's recovery is occurring despite recent increases in mortgage rates by several major lenders, including Barclays, Santander, Skipton, TSB, and The Nottingham Building Society. These lenders have raised rates on fixed mortgages, with some increases around 0.15 percentage points. Coventry Building Society had previously announced rate increases across its fixed-rate mortgage range, and other major banks like NatWest and HSBC also raised rates earlier in the month. Experts anticipate further rate hikes.
These mortgage rate increases are linked to broader financial market turmoil, partly triggered by fears of inflation stemming from geopolitical tensions in the Middle East. The yield on long-term government bonds, known as gilts, has reached levels not seen since 1998 and 2008, respectively for 30-year and 10-year gilts. This has increased expectations that the Bank of England may raise interest rates, driving up the cost of borrowing for banks, which is then passed on to consumers through higher mortgage rates.
Even modest increases in mortgage rates can add significantly to monthly payments. For a £200,000 repayment mortgage over 25 years, a rate change from 5.50 percent to 5.65 percent would increase monthly payments by approximately £18. While seemingly small, these increases accumulate over time, making it crucial for borrowers to secure the best possible rates. Speculation about potential tax increases in the upcoming budget and the ongoing impact of global events continues to contribute to a cautious atmosphere for both buyers and sellers.