March Market Insights: Letter to investors

Dear Investors,,

In our latest market update, we delve into recent developments that reflect a notable shift in the UK housing sector. As of March, for the first time in six months we observed a decline in house prices, a trend highlighted by data from Halifax.

The reported decrease of 1% underscores the impact that rising mortgage rates have had on affordability for those looking to purchase homes. This adjustment resulted in an average house price reduction to £288,430, a decline of approximately £2,900.

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Despite this monthly decrease, it's important to highlight that house prices remain slightly above their standing from the previous year, with a marginal growth of 0.3% in March year-over-year. This figure represents a slowdown from February's 1.6% annual increase, signaling a cautious outlook for the market.

The dynamics of the market have been influenced by a series of economic factors, notably the significant rise in interest rates initiated in 2022 to counter inflationary pressures. Kim Kinnaird, director of Halifax Mortgages, noted the resilience of house prices amidst these challenges, though she acknowledged ongoing affordability issues for prospective buyers and the impending financial adjustments for homeowners with fixed-term deals.

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According to BBC news, this scenario mirrors observations from Nationwide, another leading lender, which also reported a dip in house prices for March. The consensus among experts suggests that the spike in mortgage rates has begun to exert its influence on the housing market, leading to the recent adjustment in pricing..

The backdrop to these developments includes the Bank of England's monetary policy adjustments post-Covid pandemic, aimed at curbing inflation through rate increases. This has, in turn, affected mortgage rates, thereby altering the landscape for borrowers. While there was a brief period of optimism for potential rate cuts, recent hesitations have led to a stabilization and, in some cases, an increase in mortgage rates.

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As we move forward, the housing market's trajectory will closely align with interest rate trends and their implications on affordability and borrowing costs. Halifax's analysis, focusing on mortgage-based transactions, offers a window into the broader market trends, excluding cash and buy-to-let deals which represent a significant portion of the market.

For our clients navigating this landscape, staying informed on these trends will be crucial for making informed decisions, whether for purchasing, selling, or investing in property. We commit to providing you with the most current insights as they unfold.

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Warm regards,

The LESSEL Team