UK monthly rental growth sat at 0.9% in December, with rents up 11.5% on an annual basis, according to Zoopla. Rental growth continues to be the strongest in London, up 1.5% in December. It’s followed by the North East, with rents up 1.1% over the month. Rental growth has been the weakest in the South West, up 0.5%.
Demand will be supported by falling mortgage rates which averaged 5.4% for a 75% LTV 2 year fix in December, according to the Bank of England. This is down from the peak of 6.0% in October, but considerably above the average rate of 1.6% in December 2021. The latest 50 basis point hike to the base rate will have little effect on mortgage rates as most lenders have already priced it in. At 4.0%, this is expected to be near the peak base rate, assuming inflation continues its downward trend. Although mortgage rates are expected to continue falling, they are not expected to return to the pre-covid lows in the foreseeable future.
Completed sales volumes held steady in February, down just -7% when compared to the pre-Covid average for the month.