Is the ‘Mortgage Price War’ Losing Steam in London?

The latest figures from the Land Registry have sent ripples through the London housing market, with a surprising 6% year-on-year fall in prices, marking the most significant annual decline since the economic turbulence of August 2009. The abrupt monthly falls of over 2% in both October and November have collectively slashed £26,000 off the average home price in the capital within a mere 61 days. The looming question is whether this trend will persist, potentially pushing the average home cost in London below the £500,000 mark for the first time since July 2021.

Timing Discrepancies in Housing Data
The seeming contradiction between the Land Registry numbers and those from other prominent house price indices, such as Nationwide and Halifax, can be attributed, in part, to timing discrepancies. The Land Registry figures represent completed prices reported to the registry for that specific month, in this case, November. However, the process from the exchange to completion can be a protracted one, potentially reflecting prices agreed several months earlier, possibly during the late summer or early autumn of the previous year.

What Shaped the Market Dynamics?
Casting our minds back to the period when these prices might have been agreed upon reveals an environment still reeling from the effects of a half-point rise in interest rates in June, followed by an additional quarter-point increase in August. This marked the culmination of the recent round of tightening. However, the narrative of “higher for longer” began to dissipate as inflation receded more rapidly than anticipated. This unexpected turn prompted a responsive decline in gilt yields and fixed mortgage rates, injecting renewed vigor into the housing market during the fourth quarter.


Market Resilience in the Face of Predictions
Contrary to predictions of a sharp correction, the housing market demonstrated resilience, defying expectations. The easing of inflationary pressures provided an unexpected boost, revitalizing the market and challenging the anticipated downturn. The ripple effects of the interest rate adjustments earlier in the year seemed to fade away as market dynamics adapted to the new economic landscape.

The Ongoing Mortgage Price War
As the London housing market navigates through these fluctuations, the concept of a ‘mortgage price war’ looms in the background. The shifting dynamics of interest rates, inflation, and market sentiments continue to shape the landscape for potential homebuyers. The competitive environment among lenders, marked by attractive mortgage rates and financing options, has played a significant role in driving market activities.

In conclusion, the London housing market appears to be undergoing a period of transition, marked by both unexpected declines and resilient rebounds. The nuanced interplay of economic factors, coupled with the timing disparities in reported data, adds complexity to our understanding of the current state of affairs. As we delve deeper into 2023, the trajectory of the ‘mortgage price war’ will undoubtedly be a key factor influencing the ebb and flow of London’s real estate landscape. Homebuyers and industry observers alike are keenly watching as the market navigates through uncertainties, poised for potential shifts and surprises in the coming months.