Bank rate hikes have driven down transaction volumes

Bank rate hikes have driven down sales volumes – Here’s the regions that have been hit hardest

The latest research by property purchasing specialist, House Buyer Bureau, has shown that property sales have been falling ever since the Bank of England started hiking the base rate, declining at an average rate of -3.4% per month across Britain since December 2021.

House Buyer Bureau analysed the level of monthly transactions seen across Great Britain since the Bank made the first of its now 13 consecutive base rate hikes in December 2021 and how market activity levels have changed both in terms of the monthly total seen, and the average monthly change.

Across Great Britain there were just 43,209 transactions in February 2023, -45.2% less than in December 2021.

The decline really started to kick in this year, as sales volumes in January (44,635) and February 2023 (43,209) are -27.9% and 37.0% lower than the same months in 2022.

As a result, the average monthly level of transactions seen since December 2021 has declined at a rate of -3.4% per month.

The Bank base rate currently sits at 5%, following a 0.5% increase in June. The central bank is looking to curb inflation, as CPI inflation stood at 7.9% as of May 2023.

Wales worst hit
Wales has seen the biggest reduction in market activity, with total monthly sales falling by 51.5% as only 2,001 properties changed hands in February 2023, versus 4,122 in December 2021. The nation has also seen monthly transaction levels decline at an average rate of -4% per month over the last 15 months.

Similarly there was a particularly strong decline in the East of England (-48.1%) and East Midlands (-47.3%), where monthly transaction levels have fallen at an average rate of -3.7% and -3.6% per month respectively.

While London often sets its own housing narrative, the UK capital has also largely reflected the rest of the market in terms of a reduction in market activity, with the number of homes sold falling by an average of -3% per month since December 2021.

Owing to the high cost of property in the capital, surely only those with the deepest pockets will be able to continue investing in London, either with cash or a hefty deposit.

Scotland has seen the smallest reduction in transaction levels, however, the 5,365 homes sold in February 2023 still sits -39.9% below the level seen in December 2021, with the nation seeing an average monthly decline of -2.8% in the number of homes sold since interest rates started to increase.

Managing Director of House Buyer Bureau, Chris Hodgkinson, commented:

“The gloom is starting to set in across the UK, as higher mortgage rates serve to blunt people’s ambitions to buy.

While some regions have fared worse than others, it’s clear that every corner of the market is feeling the effects of the current climate, as the perfect cocktail of high energy costs, high inflation and rising mortgage costs impacts affordability and confidence.

In the current environment the only possible winners are cash buyers, because – faced with less competition from mortgaged homebuyers – they are in a good position to haggle for a favourable purchase price.

For the rest of us, here’s hoping the Bank’s repeated base rate hikes fulfil their purpose and push inflation back near its 2% target. Until that happens it’s difficult to predict how high the base rate – and therefore mortgage rates – could climb.”