Property transactions in April 2024 were 17% higher year on year than in the same month of 2023, according to statistics released by HMRC on 31 May. Although this was 9% lower than in March, it reflects healthy growth in the property market despite ongoing uncertainty for buyers and sellers.
The increased volume of property transactions over the past year corresponds with data released by the Bank of England, which reveals that mortgage approvals hit an 18-month high in March, following six consecutive months of increases.
Curiously, recent data from property finance specialists Octane Capital indicates that total mortgage lending in Q1 2024 had sunk to the lowest level seen since the end of 2021, with £50.5 billion lent during this quarter. The combination of increasing mortgage approvals and reduced overall lending suggests that the more affordable end of the market could be recovering fastest.
UK Finance forecast this fall in lending at the start of the year, citing a period of post-lockdown strength and ongoing pressures to household finances and affordability.
Given that the base interest rate has held steady at 5.25% since August 2023 (a 16 year high), and is not predicted to fall until the Bank of England’s next meeting on 1 August, lenders are likely holding out for rates to drop so as to offer better rates on their mortgages to incentivise buyers.
Mortgage lending down, but cash reserves up
Despite mortgage lending being down, the data on property transactions show that market activity is continuing at an even pace. Indeed, we may be seeing more consumers preparing to buy once the general election is over and interest rates have eased.
The same publication from the Bank of England showed that households in April of this year deposited an additional £8.4 billion with banks and building societies, the highest net inflow since September 2022 (£8.8 billion). This suggests both that households are still able to save despite the cost of living, and that buyers are potentially holding back on their property transactions in advance of the election.
Pent-up demand ready to be unleashed?
Market conditions could improve after the election, though perhaps not immediately – ongoing stability in the property market suggests many buyers and sellers are undeterred by current challenges. Data from TwentyEA reveals that supply and demand volumes were up in the 14 days following the election’s announcement on 22 May over the same period last year. Executive director Katy Billany said: “With activity remaining steady despite the upcoming election, the market is looking pretty upbeat and is comparable with 2019, the period prior to the pandemic.”
And if ongoing electoral uncertainty and high interest rates can’t totally suppress growth in the market, we could well see a strong second half of the year once those issues are resolved. Confident consumers are already making moves, and a fall in interest rates on 1 August could tempt more cautious homebuyers back to the market as well.
