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Nationwide house price index October 23 - reaction

ended 01. November 2023

The Nationwide has just published its October house price index. On the back of this, Newspage sought the views of 12 mortgage and property experts, below.

12 responses from the Newspage community

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We saw a surprising uptick in activity in October with a much healthier number of purchase enquiries. It feels like those people who have stalled due to interest rate volatility are all now coming forward, having had time to get used to the new cost of mortgage funding. With house prices lower than they have previously been, there is a growing opportunism creeping into the buyer market, despite the higher lending costs. One thing's for sure, if what we are seeing this October is reflective of the market as a whole, then things, may, just may, be starting to turn a corner.
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October saw an uptick in transactions, with purchase activity twice the level we experienced in September. That may explain this slightly surprising data, which few were expecting. Buyers are currently able to secure some good deals, with some punchy offers being accepted by under-pressure sellers. This will likely continue into the new year as more property comes to market all aiming to gain attention. Why wait in the hope prices will fall significantly? Sure, there will be small drops but nothing major, as demand is still eye-watering as renters are forced onto higher rents which they can’t afford, so naturally they do all they can to buy for themselves. Tomorrow's Bank of England base rate decision will also be key.
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October was a strong month in terms of mortgages submitted following a quiet August and first half of September. But even though there are higher activity levels, the market is still very quiet in historical terms and there's certainly no rebound yet. As the Nationwide suggests, the base rate is not likely to decline significantly for some time due to inflation. However, as mortgage rates fall, we are now seeing more borrowers looking to jump to secure a new deal. First-time buyers are particularly active, as they are snapping up a bargain from financially distressed households having to sell. However, there still remains a real lack of the next time movers looking to move further up the housing ladder. For many households, the prospect of upsizing in the current climate, and with rates where they are, is simply not appealing.
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The UK property market is once again showing its resilience based on this evidence. We experienced an unexpectedly high volume of enquiries in October, with most coming from first-time buyers. There's life in the market yet. In Leicester, and I'm sure many parts of the UK, people who have saved up for a deposit are opting to buy at current mortgage rates rather than wait for them to drop, with the catalyst being exceptionally high rents and the knowledge that now is about as good a buyers' market as you could get. This trend of first-time buyers driving activity in the market has been going on for a few months. But while first-time buyers are having a field day, buy-to-let activity has been almost non-existent. The impact of higher rates has hit many landlords for six.
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In our experience, both residential purchase and buy to let were slow in October, although there was a slight pick-up towards the very end of the month. Demand is way off where it would normally be at this time of the year. With the property market in limbo, the majority of our business has been product transfers, especially for our landlord clients. I suspect the remainder of the year will be equally as quiet despite lender rate reductions, and hope that 2024 starts in a much more positive manner than 2023 ends.
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Malaise is the word I would use to describe the property market right now, but this data seems to suggest it is gathering momentum. October's uptick in prices has certainly come out of the blue based on what we're seeing. Activity levels are down in all areas of the market, from first-time buyers and home movers to landlords. The purchase market is on ice as first-time buyers await even lower mortgage pricing and house prices before they jump onto the ladder. The market is likely to remain subdued until we start to see base rate reductions in mid-2024. The base rate is likely to remain steady for the short term, which is at least keeping up the pressure on lenders to offer better priced deals. Much rests on this week's Bank of England interest rate decision and the Autumn Statement. On a positive note, mortgage pricing is improving all the time. Margins are being cut to the bone by lenders to attract new business and we are seeing a lot of product innovation.
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October has been a far busier month than September, with more purchase enquiries than we have seen for the past 12 months, although that wasn’t particularly hard to achieve. Buyers are definitely taking time to find the right property and are not making snap offers, carefully looking at local price comparisons. Landlords continue to be under pressure, not only due to high mortgage rates and fees, but portfolio stress testing makes those who are heavily geared really struggle to refinance. The property market is going to take a long time to improve for all borrowers, whereas outright cash buyers are having a field day. Product transfers have continued to be the most popular mortgage application, with clients feeling positive there are further rate cuts on the horizon but still having concerns about monthly payments.
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October was another month that saw plenty of properties come onto the market but limited sales agreed. In contrast to what this data suggests, the property market looks to be going into hibernation until the Spring, unless a noticeable drop in house prices and mortgage rates provides the necessary wake-up call. With November and December not traditionally busy months, most will be hoping the new home buzz that typically starts in the New Year will spearhead the revival of the property market in 2024.
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Big questions remain as to how much further house prices will continue falling, but recent trends from both Nationwide and Halifax have certainly shown some mildly encouraging signs that the housing market correction may be close to the bottom. The fact that mortgage rates are also reducing on a weekly basis is starting to dissipate the affordability headwinds. With real wages also now trending positive, this should help to prop house prices up until demand returns in earnest.
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October has seen plenty of positivity and enquiries, which may be feeding through into the surprise uptick in prices, but not much in the way of new mortgage applications. Sentiment has improved, but activity hasn't. While this data is without doubt a curveball, there are still numerous headwinds facing the property market. Many lenders are reporting low business levels and so are cutting fixed rates and, more importantly, their margins, in an attempt to secure their market share among what are very low levels of borrowing. The fixed rate war looks set to continue.
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The housing market is currently in limbo, as would-be home buyers delay purchases in the belief that 2024 will bring both lower house prices and mortgage rates. I expect property values to fall a further 10% by the end of 2024, even if we avoid recession. Current prices are simply unsustainable.
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In Scotland, October saw a definite increase in enquiries from first-time buyers but many of these are now looking more towards planting their mortgage seeds for 2024 rather than looking to buy before Christmas. In some instances, this is due to a belief, or hope, that prices and rates may reduce in the coming months but for the majority, it's simply a result of the usual seasonality where the dark nights tend to subdue activity and house-buying plans are put on hold at least until after the Hogmanay fireworks have exploded. Throughout October, closing dates have still been a frequent occurrence however, with some eye-watering percentages above home report valuations still often being achieved in the main hotspots of Glasgow and Edinburgh in particular. Buy to let remains as dead as the ghouls wandering the streets on Halloween, and overall the signs are that 2023 will finish with a whimper. However, sparks could well fly early in the 2024 in the Scottish housing market.