UK Property Market Finally Shakes Off the Mini-Budget

Posted by Knight Frank Newcastle on 17th May 2023 -

The Bank of England made its 12th consecutive rate rise this month, increasing the base rate by 25bps to 4.5%. This is its highest level since autumn 2008 and the onset of the global financial crisis.

It also struck a more upbeat tone about the UK economy in its latest Monetary Policy Report stating that it no longer expects a recession this year.

While this will improve sentiment in the general economy and by extension the housing market, affordability remains a key issue that will curb the extent of any recovery.

A report from the Resolution Foundation noted that close to 1.6 million households will see their fixed-rate deals expire this year, with an average annual increase to their mortgage bill of around £2,300.

It is, along with improving supply levels, why we expect house prices will fall by a few percent this year.

UK property transactions climbed by 1.3% to 89,560 in March, which was the first increase in five months.

Housing activity was thrown off course last autumn after the tax-cutting mini-Budget saw a spike in the cost of borrowing and temporary removal of hundreds of mortgage products.

However, transactions remain 14% lower than the 2022 average of more than 104,000 a month (see chart).

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