‘Property market is weakening’, Bank Rate setters to be warned

The Bank of England’s rate setters will hear when they meet this week that the property market is weakening at both ends.

The Bank’s Monetary Policy Committee (MPC) is set to decide whether an increase in the Bank Rate from 3.75% is needed.

Many experts and commentators are expecting the MPC to agree a rise in the rate to 4% in order to deal with inflationary pressures.

They will be told that the Bank’s network of agents report that weakness in the property market is spreading to the cheaper end. It was already clear there were issues in the demand for prime homes.

In September, the Bank held interest rates, but three members of the nine-strong MPC voted for an increase.

Demand in the housing market has softened further.”

“Demand in the housing market has softened further, with pronounced weakness at the higher end and signs it is spreading into the lower end of the market, which, till now, has been more resilient,” the agents report.

“Higher quoted mortgage rates are weighing on affordability, with reports of weaker mortgage volumes.

“In the second-hand market, a widening gap between seller expectations and buyer willingness to pay is prolonging transactions. Housebuilders continue to rely on incentives to support volumes, while new-build supply remains constrained by weak viability.”

They added: “House prices are broadly flat overall, masking regional differences, with declines in London and the South East continuing and increases in the North West, for example.”

“UK rental prices are picking up, while London rents are broadly flat.

“Higher mortgage rates are delaying moves into owner-occupation and regulatory changes continue to encourage small-scale landlords to sell, with supply increasingly concentrated among large portfolio landlords.”