Buyer demand 'waning' ahead of interest rate decision

The property market could be set for further upheaval when the Bank of England makes its latest interest rate decision today.

The central bank's Monetary Policy Committee has already raised the base rate at three of its previous monthly meetings to tackle soaring inflation.

With the cost of living measure now at 7%, analysts are expecting the base rate to rise from 0.75% to a 13-year high of 1% this afternoon.

This could impact the ability of buyers to get mortgages and dent housing market confidence.

Agents have highlighted signs of buyer demand already waning though amid the cost of living crisis.

It comes as HMRC data yesterday showed the number of transactions that qualified for stamp duty during the first quarter of the year were 13% lower than the final three months of 2021 and down 25% annually.

Separate figures from the Bank of England also showed mortgage approvals for house purchases dipped by 0.4% between February and March 2022 to 70,700 and were 14.5% down compared with the same period last year.

The level of mortgage approvals were still above the 12-month pre-pandemic average of 66,700 up to February 2020 but agents remain cautious.

Marc von Grundherr, director of Benham and Reeves, said: “Many lenders are now acting with a far greater degree of caution and for prospective buyers this means fewer product options at higher rates. 

“This has inevitably reduced the number of buyers being approved for a mortgage, although those that have are still able to take advantage of a relatively affordable cost of borrowing.

“Of course, while current mortgage rates still remain fairly favourable, we expect that they will continue to climb throughout the remainder of the year. So those considering a purchase would be best advised to act now as they may well find the offer presently on the table won’t be there in a month or two.”

Simon Gammon, managing partner at Knight Frank Finance, added: “Demand on the purchase side remains strong but we are just beginning to see some subtle signs of slowing. 

“Rising mortgage rates and uncertainty over the economic outlook is clearly taking a toll on sentiment and we expect mortgage approvals to fall in the months ahead before settling at longer term norms. 

“Another hike in the base rate is overwhelmingly likely today. 

“If the Bank of England indicates that it’s likely to take a more aggressive approach to combat inflation we’d expect to see an immediate impact in the mortgage market. Lenders are already repricing products on a weekly basis so borrowers have got to move quickly if they want to secure a good rate – this isn’t something you can put off until tomorrow.”