Some normality is no bad thing

Shifting back to a ‘normal’ market

Memories can be short-lived in the mortgage market and that can make for some extreme reactions, for example, there is sometimes a tendency to overreact when things go up or down, be that prices, rates, product numbers, transactions, you name it.

Right now, we are starting to see a shift back to what looks like a ‘normal’ market. Given all that has transpired over the past two years, we could be forgiven for forgetting what a ‘normal’ market pre-Covid looked like, but the recent Bank of England figures are a good reminder.

The latest Money & Credit report from the Bank shows a fall in house price approvals in April. According to its data, approvals fell to 66,000 during the month, down from 69,500 in March and also slightly below the pre-pandemic 12-month average up to February 2020 of 66,700.

The trend continues in the remortgage market

Approvals for remortgages also decreased to 47,800, down from 48,681 in March and again, below the pre-pandemic average up to February 2020 of 49,500.

While this might not have mirrored what many of us are experiencing day-in day-out, the figures do still point towards a more normalised but still very strong market.

If we go back to April 2019, house price approvals were 65,747 and remortgages 50,190, so while we are heading back in time, it is nothing out of the ordinary.

A drop in approvals was always on the cards, however the Bank of England’s figures do perhaps come a little bit earlier than some of us would have predicted given the busy schedules most of us currently face.

The fact the Bank only records remortgages to a different lender could go some way in explaining this seeming anomaly in the remortgage figures but not house purchases.

That however can sometimes be the trouble with data. While the mortgage market is fortunate in the number of statistics we have at our disposal, we need to be careful not to overly dissect the data. It can at times just represent a moment in time, a snapshot of a firm’s figures and next month’s data may tell a different story.

Is this the start to a slowdown on house price rises?

Another area where it would seem logical that we start to see a slight slowdown is around house prices and we are already seeing some subtle signs of this.

Recent figures from Zoopla show in April, the average house price reached over £250k for the first time ever.

Yet there are signs this may be the peak – for now at least. At £250,200, house prices rose 8.4% in the 12 months to April – a slight fall on March’s 9%.

Outside of London, the average time between listing and sale agreed for a three-bed house is up from 16 days in March to 18 days in April. While in London, this figure is up from 17 days in March to 21 days in April – an indication the market is cooling, albeit ever so slightly.

A drop in prices but not in demand

Price reductions are also rising with an increased number of properties listed where sellers have cut the asking price by 5%. Since the second half of April, Zoopla said one in 20 properties listed for sale had a price reduction, compared with one in 22 in the previous 28 days – a pattern seen across every region. It reports an average reduction of 9%. When this is applied to the average home value, it equates to a price reduction of around £22,500.

Although the rising cost of living would suggest current house price levels cannot be sustained, the ongoing issue of supply versus demand means that, while we might see some slight falls, we are unlikely to see any notable drops anytime soon.

And this all appears to show a more normalised market, one which is more in keeping with those pre-Covid days of 2019, which might seem a long time ago, but might be returning right now. And that is no bad thing after the roller-coaster of the past 26 months.

Simon Jackson is managing director of SDL Surveying 

First published by Financial Reporter 



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