Key points –
- In 2023, there was a significant increase in online searches for mortgage-related terms, driven by the Bank of England’s interest rate hike from 0.1% to 5.25%.
- First-time buyers were particularly affected, with a 20% reduction in buying power and a 15.5% decrease in their numbers in the market.
- Property search trends shifted, with ‘freehold’ being the top search term and an increased interest in affordable family homes and fixer-uppers.
- There were notable regional disparities in housing affordability, with Cumnock, Scotland being the most affordable and Kensington and Chelsea, London being the most expensive.
- Looking ahead to 2024, housing affordability remains a concern, with predictions of continued negative house price growth and the need for further reductions in mortgage rates.
In a year marked by significant changes in the UK housing market, new data from Zoopla has shed light on how buyer behaviour and trends evolved in 2023. This comprehensive report details the shifts in mortgage rates, the impact on first-time buyers, and the changing preferences in property searches.
The Mortgage Rate Maze
The year 2023 witnessed an almost constant online search for mortgage-related terms, roughly every 23 seconds. This spike in interest was a direct response to the Bank of England raising the base interest rate from 0.1% to a substantial 5.25%. This move, aimed at curbing high inflation, left many homeowners and potential buyers anxious about the implications for their mortgages.
Zoopla’s data highlights a 62% increase in searches for ‘mortgage rates’ and a 43% surge in queries for ‘mortgage repayment calculators’. Additionally, there was an 85% increase in searches for ‘when will interest rates go down’ and a 43% rise in searches for ‘interest rate predictions’. These figures underline the public’s concern and the need for clarity in a fluctuating financial landscape.
First-Time Buyers: A Hard Hit Demographic
The shifting financial environment proved particularly challenging for first-time buyers. Their purchasing power declined by up to 20% across the UK. Zoopla reports a significant 52% decrease in search terms related to first-time buyers compared to the previous year. Consequently, there was an estimated 15.5% drop in the number of first-time buyers in the 12 months leading up to September 2023.
Searching for the Dream Home
With affordability becoming a central concern, 2023 saw a change in how people searched for their ideal homes. The most popular month for property completions, both for new and existing homes, was March, indicating a surge in market activity at the year’s start. In contrast, user activity on property websites peaked in July. Notably, the average time to sell a property increased to 34 days from 25 days in 2022, with three-bedroom homes being the most sought-after.
Top Property Search Terms
The year also saw a shift in the most popular search terms on Zoopla.co.uk. ‘Freehold’ emerged as the top keyword, rising from third place in 2022. ‘Annexe’ also gained popularity, reflecting a growing trend towards intergenerational living. The list of top keywords includes Freehold, Garage, Annexe, Acre, Garden, Pool, Cottage, Rural, Seaview, and Ensuite, indicating diverse preferences among potential homeowners.
Most Viewed Properties
In a telling sign of the times, seven out of the top ten most viewed properties were affordable family homes or fixer-uppers. Only three were multi-million-pound properties, suggesting a more realistic approach to what buyers considered within their financial reach.
Regional Highlights and Affordability
Zoopla’s report also highlights regional disparities in the housing market. Cumnock, Scotland, emerged as the most affordable town based on the price-to-earnings ratio. In contrast, Inverclyde, Scotland, was noted for having the cheapest average house price at £103,200. On the opposite end of the spectrum, Kensington and Chelsea in London maintained its position as the most expensive area, with average house prices reaching a staggering £1,209,100.
House Price Growth and Pandemic Trends
2023 saw a notable reversal in pandemic trends, particularly in coastal areas. Calderdale, Yorkshire, experienced the strongest house price growth at 3.1%, while Dover, Kent, saw the weakest at -0.7%.
Looking Ahead to 2024
As we move into 2024, the focus is on improving housing affordability to attract more buyers and support sales. Despite a lesser-than-anticipated fall in house prices in 2023, combined with 5% mortgage rates, buying a property remains a costly affair for the average household.
Zoopla anticipates that for a significant change in affordability, house prices need to decrease further as incomes rise. If mortgage rates drop to 4.5% by the end of 2024, house price growth is expected to stay negative, with a 2% decline projected. A quicker reduction in mortgage rates towards 4% could stimulate sales activity rather than inflate house prices.