There was a glimmer of encouragement for the UK property market today as the Bank of England held interest rates at their current level of 0.50 per cent amid the news that the number of homes sold in May increased on April. The Monetary Policy Committee (MPC) voted six to three in favour to hold rates, a reflection of the fact that CPI inflation was 2.4 per cent in May, unchanged from the previous month, and which is expected to increase slightly in the near future due to higher dollar prices and a weaker sterling exchange rate.
By holding rates today, the MPC have the slack to increase rates at a ‘gradual pace’ should they need in order to bring inflation back to target levels later in the year.
Of course, this bodes well for those who are currently considering buying a property or indeed remortgaging, as with the base rate on hold, mortgage rates will remain at their currently competitive levels.
In a further boost to the property market, figures revealed this morning from HMRC suggest that there was a slight increase in the number of homes sold in May.
The number of completed sales rose on an adjusted basis, up from 98,820 in April to 99,590 last month, with the number of properties sold overall since the beginning of the year so far standing at 492,350 on an adjusted basis.
This is, however, lower than the same period last year when the total number of property sales stood at 611,980.
Brian Murphy, Head of Lending for Mortgage Advice Bureau said of the HMRC report: “Looking at the figures, it’s very much ‘steady as she goes’ in terms of the overall level of transactions so far this year. However, that somewhat masks the ‘two-tier’ levels of activity and fragmented market that we’re currently seeing across the UK, as some areas are seeing heightened levels of buyer activity and house price growth, whilst others are struggling both in terms of numbers of buyers decreasing and as a consequence, prices stuttering.”
Brian continued: “There will possibly be a few who will be disappointed with the result this month, as May completions are mostly the result of sales agreed in March, which points to the fact that as many agents had anecdotally suggested, it was a slower start to the spring selling season than many would have hoped for, albeit that there was a slight increase in completions in May on April.
“However, if we’re taking a more holistic view, one would suggest that given the current political and economic uncertainties, even though the numbers may be down slightly on 2017, the lack of volatility is a positive indicator.”
Mike Scott, chief property analyst at online estate agency Yopa also commented: “HMRC confirms that the market has recovered from its brief downturn at the end of the first quarter, which was probably due to the unusually bad winter weather. The number of house sales in May was only 0.5 per cent down on the same month last year.”
Mike added: “These numbers, along with other recent statistics, show that the housing market remains steady, with the number of houses sold staying roughly level and prices rising slightly slower than average earnings. There seems no reason why it can’t continue like this at least for the rest of this year, unless some change in the wider economy causes it to turn up or down.”
Anecdotally, many agents up and down the country believe that the ongoing Brexit wrangles are causing would-be buyers and sellers to sit on their hands, until a European divorce deal is confirmed.
That wouldn’t be entirely surprising, given the UK property market is very much driven by sentiment, whether positive or negative.
A similar ‘wait and see’ approach is often observed in terms of property transactions in periods leading up a general election; indeed, it’s often not the result per se that makes people decide one way or the other to move home, it’s just the uncertainty of the situation in general in the lead up to Election day.
However, once the Brexit path is defined – whatever the direction it may take – it’s quite possible that those who are currently hesitant may decide to take action, particularly as today’s interest rate decision came with a rather large hint that rates are very likely to rise in the coming months, due to the vote in favour to raise rates from the Bank’s chief economist Andy Haldane.
This suggests that there is, potentially, a small but significant window of opportunity for those buying to use the currently stagnating market to their advantage in order to negotiate a better deal, together with securing a one of the ultra-low fixed rate deals which are still available as lenders aim to tempt more customers onto their books.
How long that window will remain open for, however, is anyone’s guess.