UK residential market: latest hike in bank rate unlikely to slow sector’s momentum
Supply building and demand proving resilient as we head into spring market.
2 minutes to read
Following the 11th consecutive rise by the Bank of England on 23 March the main bank rate now stands at 4.25%, up from 4%, its highest level since October 2008 and the global financial crisis.
While it confirms a new economic reality for buyers, the latest 25 basis point increase – briefly in question due to the collapse of Silicon Valley Bank and rescue of Credit Suisse by UBS in March – is unlikely to have a material impact on the residential housing market’s momentum.
While mortgage rates have proved volatile in recent weeks against this nervy backdrop, movements have paled into insignificance compared to the rollercoaster ride that followed last September’s mini-Budget.
The overall picture is one of stability, as we explore here.
It remains the case that the further we get from the mini-Budget, the more things improve in the UK housing market. House, property prices and transaction volumes are not about to surge, but it’s increasingly clear the market is not heading over a cliff.
We expect the housing market will be solid but not spectacular in 2023, and set out our reasons here.
As the chart shows, key indicators are close to or above the five-year average in Knight Frank’s UK business having recovered from a dip that began last autumn after the mini-Budget shock.
London property market
London’s bright start has continued with the sales market proving resilient and the lettings market remaining challenging for tenants, with enduring high demand and limited supply.
The country market continues its pre-pandemic reset, reverting to a typical pre-pandemic spring market, and supply is building steadily.
It is a long way from the bumpy end to 2022, which provided plenty of material for those predicting a hard landing for the UK property sector.
While the true test for the market will come over the next few months – and we expect prices to come under pressure this year due to affordability challenges, interest rates and increasing supply – it feels like the residential property market is set to pass.
Read more or get in contact: Tom Bill, head of UK residential research
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