The UK property landscape could be set to swing to a buyer’s market as mortgage changes could increase affordability for borrowers.
Over recent weeks, various mortgage lenders have been reducing stress testing rates and adjusting how they calculate borrowers’ incomes, meaning many people are now able to borrow greater amounts. One new lender, April Mortgages, is even offering buyers the option to borrow up to seven times their annual salary, while the average is normally around four and a half times.
At the same time, the market is poised for the next Monetary Policy Committee (MPC) meeting in May which analysts predict will see the Bank of England reduce its base rate from 4.5% to either 4.25% or even 4%. This could have a knock-on effect on mortgage rates, which are already on a downward trajectory according to the latest averages.
Property portal Zoopla estimates that these affordability shifts could boost buying power in the UK property market by 15-20%, which it says will support demand and sales agreed, after a 1.6% annual rise in the average UK property price in the year to March.
Right now, buyer demand is running 1% above where it was last year, says Zoopla, cooling slightly over the past few weeks in a traditional seasonal dip after a first quarter flurry of activity. Global events, including the impact of global tariffs, could also affect buyer confidence in some segments of the market.
A more affordable landscape
In general, confidence across the UK property market has risen over the past 12 months thanks to a combination of factors. An important one is falling inflation, which although at 2.6% in March remains above the government’s “ideal” level of 2%, is an improvement on previously high rates.
Last year’s general election also sparked a politics-linked wobble in confidence, which is a common outcome of any major change at the helm of the government, enhanced by the fact that the new Labour government took over from the Tories after 14 years. This year, there is much more political certainty and less unexpected change to come from the government, which also steadies the market.
As mentioned above, lenders are also having a huge impact on affordability in the UK property market. Major banks including HSBC, NatWest and Halifax have eased their stress test rules which will effectively give more borrowing power to prospective buyers.
For example, HSBC says that its review of its affordability calculations could enable 20,000 more customers to get a mortgage with the bank, while also being able to borrow larger amounts of money, therefore unlocking a greater number of properties for buyers.
This move has been largely sparked by the Financial Conduct Authority (FCA) saying recently that lenders have potentially been “too cautious”, particularly in granting mortgages for first-time buyers.
Another contributing factor to the greater levels of affordability within the UK property market has been sustained strong wage growth, which continues to outpace inflation. The ONS’s latest figures show that annual average weekly earnings including bonuses grew by 5.9% in February.
A buyer’s market?
Zoopla’s report reveals a 6% annual increase in the number of sales agreed, while there were 15% more homes listed for sale over the past month than there were this time last year. On average, each UK property agent now has 34 homes for sale, compared with 31 this time last year.
This is also up from the 2022 low of just 15 homes for sale per agent, which was linked to the post-pandemic boom when buyer appetite sky-rocketed, pushing up UK property prices at an extremely high pace.
As Zoopla notes, many of these new sellers are also buyers (ie. home movers), which is holding up the number of sales agreed. But generally, when supply levels are on the rise compared with demand, the scales tip towards a buyer’s market giving more room for negotiation and a better level of choice overall.
