Demand is witnessing a recovery, with new mortgage approvals rising to 33% below the pre-Covid average in February, up from 41% below in January. New instructions and sales agreed have risen more sharply, according to TwentyCi. Supply of homes on the market surged to 25% above the pre-Covid average in March. New sales agreed (a measure of demand) have recovered more slowly, now back in line with the pre-Covid level for the month.
Demand is likely to continue to recover as mortgage interest rates fall, with some buyers currently holding off in the hope of securing a more attractive mortgage deal later on in the year. Borrowers have been keen to remain flexible while rates are still high, leading to a spike in January of variable rate mortgages. These comprised 10% of new lending according to UK Finance, up from just 3% of loans in 2022. Borrowers will be more willing to fix as rates stabilise over the next few months.
This will be supported by the availability of mortgage products, which has largely recovered to their levels prior to the mini-budget, a sign of increasing confidence from lenders. The exception is for 95% loan-to-value products, which remain a very limited product.
Despite slowing for the seventh consecutive month, annual rental growth in London was still 14.9% in February. Excess tenant demand still outweighs a shortage of supply to make it the region with the highest rental growth.