The UK property market has faced significant challenges over the past year, but there is hope on the horizon for potential investors. Recent research by Octane Capital, a specialist property lending firm, suggests that the market will see an upturn in activity during the autumn months.
While mortgage approval rates have experienced a sharp decline, historical data indicates that September, October, and November typically experience higher approval rates compared to the rest of the year. Although there is still a long way to go for the market to fully recover, recent improvements suggest a potential revival.
The Decline in Mortgage Approvals:
Over the past year, mortgage approvals have decreased by 23.7% compared to the previous year, with only 633,400 approvals in the last 12 months, down from 830,600. Even in more recent months, the decline persists, with approvals being 14.7% lower in the past six months compared to the preceding six months (291,600 versus 341,800).
Signs of Improvement:
Despite the downward trend, there are signs of improvement in the market. Mortgage approvals have shown a gradual increase over the last two months. May saw a modest 3.2% increase, followed by a more significant 6.9% rise in June. However, it’s important to note that the market has not yet fully regained its strength and has a long way to go to achieve a full recovery.
Steady and Falling Mortgage Rates:
Jonathan Samuels, CEO of Octane Capital, believes that the mortgage market could experience a boost in activity in the coming months. He highlights that historically autumn has been the strongest period for the property market, and there are indications of approval rates improving during the summer. Additionally, mortgage rates have remained stable and, in some cases, fallen, providing an incentive for potential buyers. With more favorable rates, buyers can act at their own pace and potentially secure properties at more competitive prices.
Adapting to a New Normal:
The Bank of England has implemented 14 successive base rate increases since December 2021, raising it from 0.1% to 5.25% in an effort to control inflation. However, Mr. Samuels suggests that high-interest rates may soon reach their peak, allowing the market to stabilize and buyers to adjust to a new normal. This normalization could bring some calm to the market and instill confidence in potential investors.
Conclusion
While the UK property market has faced challenges this year, recent data suggests a potential revival in the autumn months. Despite a significant decline in mortgage approvals, historical patterns indicate that activity tends to increase during September, October, and November. There have also been slight improvements in recent months, with approval rates climbing in May and June. The presence of steady and falling mortgage rates further adds to the potential boost in activity. However, it is important to acknowledge that the market still has a long way to go before fully recovering. With a new normal on the horizon, potential buyers may find opportunities in a quieter market, allowing them to make more informed decisions and potentially purchase properties at competitive prices.