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Agreed house sales are up 13% across all regions compared to a year ago, driven by sub-5% mortgages and pent-up demand, data from Zoopla shows.

The move is “a positive start” to the first few weeks of the year, “reflecting a return of pent-up demand following a weak second half of 2023, when many buyers delayed moving decisions in the face of rising mortgage rates,” says the property site’s January House Price Index. It adds that available homes for sale are over 20% higher than the same period 12 months ago.

But while demand is up 12% over the same period, led by London and East of England, it is 13% below the five-year average, which includes the pandemic ‘boom years’ from 2021 to 2022.

The report points out that it is “important not to over-interpret the positive start to the year – there is some upside for sales volumes, but we remain in a buyers’ market”. A fifth of sellers have had to accept more than 10% below the asking price to agree a purchase, and this figure is closer to one in four across southern England.

Mortgage rates fell to 4.2% over the first quarter of last year, which supported sales volumes and led to firmer pricing and modest price falls over 2023, the study says. It adds: “We expect lower mortgage rates to do the same in 2024 — supporting sales volumes rather than having any impact on prices.” The survey says “house prices will be kept in check by several factors” this year.

It points out that a greater supply of homes for sale will provide buyers with more choice, especially for larger family homes.

Secondly, it says: “Half of those with a mortgage are yet to refinance onto higher rates. This is important as many would-be buyers are upsizers who will need a larger mortgage to move to a bigger home. “Higher repayments will ensure buyers remain price sensitive and focused on value for money.”

Finally, it adds: “We are still in a buyers’ market. A small but not insignificant number of sellers continue to cut asking prices to make sure homes attract buyer interest, continuing the trend from 2023.”

While it wasn't surprising, it remains disappointing that the Bank of England missed an opportunity to bring some early festive cheer with a rate cut.

Given the economic outlook, it appears that we will enter the New Year with interest rates at a level higher than necessary, and there's a growing sense that a rate cut might be inevitable sooner rather than later.

Although inflation is closely monitored, the situation is precarious as thousands of mortgage holders transition from low fixed rates to a higher rate environment, coupled with a slowing wage growth. This might put the Bank in a position of playing catch-up once again.

On a positive note, recent weeks in the money markets have seen a significant decline in SWAP rates. Mortgage lenders are entering 2024 in a competitive stance, eager to retain existing customers and attract new ones to either increase or maintain their market shares.

The Bank of England Monetary Policy Committee has opted to maintain the Bank Base interest rate at 5.25%, marking the second consecutive decision to keep rates steady after 14 consecutive increases. Six members of the committee voted in favor of maintaining the rate, while the remaining three advocated for a further hike.

This decision brought relief to mortgage borrowers nationwide, as the Bank of England demonstrated a cautious approach, possibly in response to warnings about potential economic repercussions from excessive rate hikes. Some indicators suggest a natural decline in inflation, prompting discussions about the possibility of future rate cuts.

Despite speculation about rate reductions, Bank of England Governor Andrew Bailey anticipates that rates will remain elevated for an extended period, emphasizing the institution's commitment to monitoring inflation. The transition of numerous borrowers from low fixed rates to the current economic environment poses a significant challenge.

The Bank is navigating a delicate balance, acknowledging a somewhat bleak economic outlook. The upcoming decisions of the Bank of England will have far-reaching implications, impacting not only borrowers and the overall economy but also influencing the dynamics of the upcoming General Election next year.

As SWAP rates are expected to gradually decrease in the coming days, lenders may find more room for additional rate cuts. The growing competition in the market could potentially spark a new phase of a rate war, shaping the financial landscape in the near future.