House sales dip but average fixed mortgage rates hit a six-month low

House sales fell by nearly a fifth (18%) in February 2023 compared with the same month a year earlier, in signs that the housing market is slowing, according to HM Revenue and Customs (HMRC).

Across the UK, an estimated 90,340 homes were sold in February this year, which was 4% lower than in January 2023.

HMRC’s report said: “Towards the end of last year mortgage and interest rates increased and we are starting to see the impacts of those changes within these statistics.

“Seasonally adjusted residential property transactions appear depressed, indicating a slowing of the housing market.”

The figures were released as financial information website Moneyfacts said average two and five-year fixed-rate mortgages have edged down to their lowest levels in six months.

Mortgage rates jumped following the mini-budget last September, with rises in the Bank of England base rate also impacting borrowing costs.

Average two and five-year fixed rates now stand at 5.32% and 5.00% respectively and are both at their lowest levels in six months, Moneyfacts said.

Rachel Springall, a finance expert at Moneyfacts, said: “The average two-year fixed rate stands at 0.32 (percentage points) higher than the average five-year equivalent.

“The last time the average two-year fixed rate was this far above the five-year was 15 years ago.

“Rate competition among lenders has been more focused on longer-term fixed mortgages.

“As the overall two and five-year fixed average rates drop to their lowest levels in six months, borrowers who put their plans to remortgage on hold towards the tail end of last year may now be looking at the latest offers.”

However, the average standard variable rate (SVR), which borrowers end up on when their initial mortgage deal ends, has continued to climb.

At 7.12%, the average SVR is now the highest rate since April 2008, when it was at 7.16%, Moneyfacts said.

Around 1,116,110 house sales have taken place so far this financial year (April 2022 to February 2023), according to HMRC’s figures.

This compares with 1,263,250 house sales taking place over the same period a year earlier.

There were large peaks in housing transactions during March, June and September 2021, caused by increased numbers of taxpayers taking advantage of temporarily increased nil rate bands of stamp duty (which applies in England and Northern Ireland) and its equivalent tax in Scotland and Wales.

Nicky Stevenson, managing director at estate agent group Fine & Country, said of February’s house sales figures: “Due to the length of time it takes to complete on a property, many of these sales will have been agreed just as mortgage rates spiked last autumn, resulting in a number of transactions stalling due to affordability issues.

“While we will continue to see a slowdown in sales compared to 2022 and 2021, both years were remarkable outliers, driven by the race for space and stamp duty holidays.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Swap rates, which underpin the pricing of fixed-rate mortgages, have started falling again, and a number of high-profile lenders have reduced fixed rates.”

Jason Tebb, CEO of property search website OnTheMarket.com, said: “The upheaval of the autumn has given way to increased calmness, with inflation looking as though it may have peaked.”

Rhys Schofield, managing director at Derbyshire-based mortgage advisers Peak Mortgages and Protection, said: “Things have improved dramatically over the past two months or so.”

Carl Howard, group CEO of Andrews estate agents, said: “Buyers who were hunkering down at the end of 2022 are now steadily returning to the market.”

Nick Leeming, chairman of estate agent Jackson-Stops, said: “Just in time for the ‘spring bounce’, buyers are renewing their searches in earnest as more listings enter the market, building up momentum for a period of more deals and with that, more stability.

“Internal data from across Jackson-Stops’ own national network shows a moderate uptick in viewings, instructions, exchanges and listings month-on-month.”

Iain McKenzie, CEO of the Guild of Property Professionals, said: “Inflation is still high and many budgets are squeezed to the point that there’s limited ability for prospective buyers to increase offers above the asking price. We could see this trend continue until living costs are brought under control.”

Tom Bill, head of UK residential research at Knight Frank, said: “February’s drop in sales needs to be seen in the context of a housing market that effectively switched off for the last quarter of 2022 and only turned back on again after Christmas.”