Januaryโs cooling price inflation is a welcome sanity check for a market which built up a significant head of steam at the end of 2024.
Letโs be clear, the reduction in the pace of price growth is modest. Average prices have risen 2% in just three months, and at 4.1% the annual rate of inflation is still higher than it was in every month of 2024 except December.
Thereโs still plenty of demand in the market too. Estate agents rang in the New Year with a jump in buyer enquiries and the online property portals reported record search traffic over the Christmas period.
Yesterday the Bank of England confirmed a surprise jump in the number of mortgages approved in December, and these will feed through into purchases in the coming weeks and months.
Two factors are powering this momentum – the final weeks of the โstamp duty stampedeโ as many first-time buyers race to complete their purchases before the stamp duty thresholds change at the end of March.
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The second is the feeling that cheaper mortgages are on their way.
Next week the Bank of England is widely expected to reduce its Base Rate, and this will gradually reduce the cost of borrowing.
Yet for all the momentum in the market, price rises are neither inevitable nor unquestioning.
Buyers remain intensely price-sensitive, and the abundance of properties for sale means many wonโt hesitate to walk away from homes they like but feel are overpriced.
The pace of price rises varies widely by region too, and thereโs a clear north-south divide. Price rises are modest or even flat in some very desirable parts of southern England, and here weโre seeing buyers ask for, and get, significant discounts.
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