UK Housing Market Update

November 2017

What the lead indicators tell us this month

November 2017, by Chris Buckle and Holly Titford

MPC follow through on rate rise as inflation hits 3%

Summary

Annual house price growth picked up slightly hitting 2.5% in October up from 2.0% in September according to Nationwide. Monthly growth remained at 0.2% for the second month in a row, half of the average level seen over the last four years. We anticipate growth will slow further over the coming year as uncertainty continues to weigh on the market. Our new UK house price forecasts, published on 2nd November anticipates 14% growth over the next five years (see here).

Surveyors responding to the RICS survey were no more positive in September than in August, with a small majority reporting price rises. Sentiment surrounding transaction activity is more volatile. A significant drop in the number of surveyors reporting rising numbers of buyer enquiries suggests there may be some downward pressure on prices in the coming months. The small majority reporting falling instruction volumes remains. However, mortgage completions data suggests an uptick in activity. Completions from first time buyers and homes movers were up 9% in the three months to August compared to the same time last year.

The Bank of England base rate increased to 0.5% on 2nd November, following inflation reaching a new high for the last 5 years at 3.0% in September. The Monetary Policy Committee voted 7 to 2 in favour of the increase. The Governor, Mark Carney, suggested two further rises each of 0.25% will follow in the next three years. Though likely to push mortgage rates up these increases follow years of falling mortgage rates due to shrinking lenders’ margins. The average two year fixed term mortgage interest rate is now 0.53 percentage points less than in August 2015. So this small rise is unlikely to have a major impact.

 

 



 

 

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Chris Buckle

Chris Buckle

Director
Residential Research

Savills Margaret Street

+44 (0) 207 016 3881