With the Bank of England holding interest rates at 5.25 per cent in September, confidence is growing that we are nearing the peak of rate rises, if not there already. All eyes will be on upcoming economic data to see whether lower wage growth and a fall in inflation are enough to keep further rate rises at bay. As confidence is so central to the housing market and people’s decisions about whether to buy or sell, last month’s pause in rate rises was extremely welcome, giving people more certainty about the future and, if they are buying a property, what they can afford to pay. Meanwhile, property prices continue to soften rather than suffer a significant correction or crash. Halifax reports that the average house price fell by 0.4 per cent in September, compared to a 1.8 per cent drop in August, indicating that the pace of the declines is slowing. The typical home now costs the same as it did in early 2022 with average prices still more than £39,000 above pre-pandemic levels. Higher borrowing costs are the main reason why activity levels are subdued, as rising interest rates have had a knock-on impact on affordability.

Swap rates, which influence the pricing of fixed-rate mortgages, continue to edge downwards. With five-year Swaps at around four and a half per cent, and two-year money at not much above 5 per cent, this is a much healthier position than last autumn when Swaps soared on the back of Liz Truss’s ill-fated mini-Budget. Most importantly, the volatility we saw in Swaps has disappeared, giving lenders more confidence when it comes to pricing fixes. Subsequently, property portal Rightmove reports that the average five-year fixed-rate mortgage is 5.43 per cent, down from 5.75 per cent a year ago, while the average two-year fix is 5.92 per cent, down from 6.09 per cent a year ago. However, while these are moving in the right direction it is worth remembering that averages are just that and cheaper rates are often available, depending on your circumstances and loan-to-value, so it is always worth seeking advice from a broker such as AWS Private Finance.

While borrowers may need to get used to higher mortgage and interest rates, for those who still meet affordability criteria and therefore are in a position to buy, it may be a good time to do so. We have just done a mortgage for a client buying a £2.45m flat, where a similar flat next door sold for £3.25m 18 months ago, suggesting there are opportunities out there. If price reductions are significant enough, they may even offset higher rates, while estate agents tell us that buyers are facing less competition because there are fewer of them out there.

Meanwhile, rents continue to rise, with the Office for National Statistics reporting a 5.5 per cent increase in the 12 months to August, up from 5.3 per cent in the year to July. Regional variations can be significant, with London rents rising at their highest annual rate since data recording began in January 2006, making it even harder for first-time buyers in the capital in particular to save for a deposit.

While buyers may be keen to time the market, selling at the top and buying at the bottom, this is notoriously difficult. While nobody has a crystal ball and knows for sure, it is possible that when interest rates start to fall, and it becomes cheaper to buy than rent, we may see people start buying again. Once demand and appetite to buy increases, then supply may well reduce and property prices rise once more. The peaking of interest rates, when it comes if it hasn’t already, will play a big part in bolstering market confidence and getting things moving again.

Whatever your situation, it is worth seeking mortgage advice. AWS Private Finance is a whole-of-market mortgage broker which can advise as to the best mortgage for your circumstances, whether you are buying a new home or investment property or remortgaging. Get in touch for more information.