By Laura McGuire
Demand to purchase a home in London rose 21 per cent in January, according to a new report, but the capital has been warned not to “get carried away” amid a frenzy of mortgage rates cuts.
Zoopla’s latest house price index showed that housing affordability in London is the best since 2016, with the average price of a property costing £536k last month, a year-on-year decline of 1.1 per cent.
“We expect market conditions in London to continue to improve over 2024, with earnings rising faster than house prices,”the property portal said.
“This will continue to improve affordability and support levels of housing sales rather than boost house prices.”
Buyer demand in London is also up 21 per cent as a slew of mortgage rates cuts by high street lenders has improved sentiment.
Last week Nationwide slashedsome of its rates by as much as 0.81 per cent and rival Barclays cut its rates by as much as 0.6 per cent.
The Bank of England raised interest rates 14 times to help curb soaring inflation, leading lenders to raise the cost of their mortgage deals.
While they have fallen since, an average two-year fixed residential mortgage rate today is 5.56 per cent, marking a significant fall from its July peak of over six per cent.
However this remains a steep increase from December 2021, when it stood at 2.34 per cent.
Experts at Zoopla said that while lower mortgage rates are welcome news, it seems “unlikely” rates will fall much further in the near term, remaining in the 4-5 per cent range with the best deals for those with big deposits.
“While the start of the year has been positive for the sales market, it’s important not to get carried away by the outlook for the rest of 2024,” they said.
“We remain in a buyer’s market with plenty of choice for would-be movers. Zoopla’s data shows a small but not insignificant number of sellers continue to cut asking prices to ensure homes attract sufficient interest, continuing the trend from the second half of 2023.”
“Over one in five sellers are still having to accept more than 10 per cent off the asking price to secure a sale. This is close to one in four across London and the South-East and rising across the rest of the UK,” they added.
