The Bank of England has warned that conditions in the UK property market are weakening, with transactions falling, buyers becoming more cautious and sales taking longer to complete.
Feedback gathered through the Bank’s network of regional agents suggests sentiment across the housing market has deteriorated further, with pressures affecting both demand and the supply of properties coming to market.
Property Transactions Falling
Estate agents have reported relatively subdued market conditions, with transaction volumes now below the levels recorded a year ago.
In some parts of the country, the number of property transactions has fallen by more than 10% year-on-year, while agreed sales are also taking longer to reach completion.
House price performance also remains weak.
The Bank’s agents report greater downward pressure on prices in London and the South East, while prices across many other regions are showing only limited growth.
Higher Mortgage Rates Hit Buyers
Mortgage affordability continues to be one of the main challenges facing the market.
Higher borrowing costs are restricting how much buyers can afford and appear to be weighing particularly heavily on the new-build sector.
Demand for newly built homes remains weak, with housebuilders increasingly relying on buyer incentives and bulk property sales to maintain cash flow.
The Bank’s contacts also see little indication that new housing supply is likely to increase significantly in the immediate future.
Interest Rate Decision Could Be Crucial
The warning comes ahead of the Bank of England’s latest interest rate decision.
Bank Rate currently stands at 3.75%, and markets broadly expect the Monetary Policy Committee to leave rates unchanged at its September meeting.
However, the committee is becoming increasingly divided.
At its previous meeting, three of the nine MPC members voted for an interest rate increase, suggesting concerns about inflation remain despite signs that the property market is slowing.
What Does This Mean for the Housing Market?
The Bank is facing a difficult balancing act.
Keeping interest rates higher may be necessary to control inflation, but expensive mortgages are already putting pressure on property transactions and buyer affordability.
For homeowners and property investors, the key issue will be what happens to mortgage rates over the coming months.
If borrowing costs remain elevated, the housing market could continue to experience lower transaction volumes, slower sales and greater pressure on property prices.
However, any future improvement in mortgage affordability could help bring buyers back into the market and support transaction numbers.
For now, the Bank of England’s latest assessment suggests the UK property market has entered a noticeably softer period.
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