Market plays waiting game as the latest Brexit deadline approaches
House prices fell by 0.2% in September, leaving them just 0.2% higher than this time last year, according to Nationwide. London and the South East both experienced prices falls over the year. The slowdown has now spread to the East Midlands and South West, where house price growth has slowed. The strongest house price growth was in the West Midlands, the three northern regions, Wales and Scotland.
There has been a big increase in the number of surveyors reporting falling activity levels, according to the September RICS survey. This returns surveyor perceptions of market activity back to levels similar to those shortly before the previous Brexit deadline in March. Recovery will only come as greater certainty emerges. Transaction volumes continued their downward trend, particularly in London, driven by fewer cash purchases of main dwellings. Numbers of cash investors buying second homes, mortgaged home movers and mortgaged buy-to-let investors remained stable. First time buyer (FTB) numbers are still rising.
With lower market activity, there is greater competition among mortgage lenders. Rates continue to drift downwards, which suggests that the market does not anticipate an imminent base rate rise. Oxford Economics expects a rate rise to 1% in Q2 2020 under their baseline scenario (which includes an Article 50 extension to March 2020), but in the event of a no deal Brexit they consider a drop to 0.25% more likely. If there is an extension, we would expect a small boost in market activity over the winter, as happened earlier in the year following the Brexit extension from March to October.