Twindig Housing Market Index 4 Feb 23

In the week that saw house prices fall for the fifth month in a row, mortgage approvals tumbled to just 35,600 and Bank Rate hit the big 4.0, the Twindig Housing Market Index (a measure of investor confidence in the UK Housing market) increased by 1.2% to 77.1.

At first glance, it appears odd that the Twindig Housing Market increased in a week of rather gloomy headlines for the housing market, but as ever the devil is in the detail. Investors appeared most interested in the commentary from the Bank of England's Monetary Policy Committee (MPC) about the future path of Bank Rate and the current trajectory of mortgage rates.

The MPC suggested that Bank Rate may peak at 4.5% - just 50bp higher than its current level - in mid-2023 after which the next likely move is down. The MPC also commented that quoted mortgage rates for high loan-to-value mortgages are also starting to fall from their post-mini-budget highs, this is good and welcome news for homebuyers.

However, there will still be a bit of a shock for those remortgaging as their new rates are likely to be significantly higher than their current mortgage rate leading to a significant increase in the cost of monthly mortgage payments. This will not be welcome against a backdrop of rising living costs elsewhere.  

The MPC still believes that inflation risks are significantly skewed to the upside, but investors are probably looking at the stability in swap rates as a guide to future mortgage rates and stability is a friend rather than a foe of the housing market. 

Overall investors in the residential markets saw the glass as half full rather than half empty this week despite the gloomy headlines, perhaps a case of don't judge a story by its headline...