House Buying Affordability Improves Amid Lower Mortgage Rates

Data from Zoopla indicates that prospective home buyers in the UK are increasingly finding it more affordable to purchase property than to rent. Recent findings reveal that approximately 40 percent of homes listed for sale on the platform are cheaper to buy with a mortgage, assuming a 20 percent deposit, compared to renting locally. This marks a notable increase from 25 percent a year ago.

This trend is attributed to declining mortgage rates and reduced borrowing pressures. January saw average mortgage rates for new loans drop to their lowest levels in four years, with rates on both two-year and five-year fixed deals falling below four percent for the first time since 2022. Major lenders such as Barclays, HSBC, and NatWest have eased stress testing criteria, allowing applicants to borrow significantly more.

The heightened affordability, combined with an increase in available property listings, contributes to a renewed momentum in the housing market. Zoopla forecasts February to achieve the highest monthly number of new listings in a decade, largely due to increasing seller confidence. Comparatively, the number of properties for sale rose by six percent in the four weeks leading up to mid-February, compared to the same period last year.

While the surge in listings is evident, the number of sales completed remains three percent lower year-on-year. Nevertheless, Richard Donnell, executive director of research at Zoopla, attributes this to a strong market performance at the start of the previous year, rather than a lack of demand.

Geographically, conditions vary significantly across the UK. In areas such as the northeast and most of Scotland, more than half of homes available for purchase are now cheaper than renting. In contrast, regions including London and the Midlands report that less than 40 percent of properties follow this trend due to elevated house prices.

Although market activity is encouraging, house price growth remains relatively modest. According to Zoopla’s house price index, average UK house prices increased by 1.3 percent over the past year, a decline from the previous rate of 1.8 percent. Notably, properties in the northwest have experienced a growth rate of 3.3 percent, while London has seen a minimal decrease of 0.2 percent.

Homeowners in southern England considering a sale this year are advised to adopt realistic pricing strategies to ensure timely transactions. This adjustment may also benefit buyers by providing more opportunities in a market that is adapting to prevalent economic conditions.