Election Aids Best Buyer’s Market in 5 Years: Knight Frank

The general election and static mortgage rates have created a buyer’s market, according to Knight Frank. The uncertainty caused by the national poll, combined with market expectations that the Bank of England will keep rates on hold, has contributed to a buyer’s market.

“Overall, mortgage rates are unlikely to fall meaningfully any time soon, and that, together with a degree of political uncertainty, is keeping demand in check.” - Tom Brill, Knight Frank head of UK residential research

Ironically, it has rarely been a better time to be a buyer in recent years. There were 5.9 new prospective buyers for every sales instruction in the UK in May, according to Knight Frank data. Buyers have only faced less competition once during the last five years, which came two months after the mini-Budget in December 2022.

Mortgage rates remain steady

The average two-year fixed-rate residential mortgage is 5.97% today, unchanged from yesterday, according to Moneyfacts. The average five-year fix is up a single basis point at 5.54% over the same period.

The housing market remained flat in June, with property asking prices, agreed sales, and the number of buyers in the market remaining stable over the month, according to the latest Rightmove house price index.

Housing market remains flat

Tomorrow, Deutsche Bank forecasts UK inflation will fall to around 2.1% in the year to May, from its current 2.3% level, but still above the Bank of England’s 2% target. And on Thursday, the central bank is widely expected to hold the base rate at 5.25% for the seventh meeting in a row.

“[BoE] Policymakers still have their eye on hot wage inflation, with earnings including bonuses still running at 6%, at the last count.” - Susannah Streeter, Hargreaves Lansdown head of money and markets

Financial markets have pushed out their expectations of a first rate cut by the BoE as far as November.

Interest rates remain steady

Knight Frank’s Brill points out: “The autumn market is likely to begin with greater political certainty, but will it be further buoyed by a rate cut?”

Inflation data this Wednesday will provide a good steer as to whether current expectations for November look too gloomy or if a cut is more likely in August or September.

Whatever month it happens in, buyers can certainly expect stiffer competition after the summer.

Buyer’s market expected to continue