Want to buy property in the UK? Now could be the time, experts say

Luxury properties in the Kensington and Chelsea district of London, UK, on Monday, Aug. 21, 2023.

Jason Alden | Bloomberg | Getty Images

The U.K. property market has been a rollercoaster for renters and prospective homeowners alike for over a year now.

Rents soared throughout 2022 and 2023 as supply and demand imbalances led to fierce competition for rental properties.

Meanwhile, mortgage rates hit a 15-year high in Britain earlier this year, pushed upward by higher interest rates and the U.K. government’s shock policy moves in late 2022. The average rate for a 2-year fixed mortgage spiked as high as 6.86% in July and was around 6% at the time of writing, according to figures from data provider Moneyfacts.  

At first glance, neither renting nor buying a property in the U.K. looks particularly attractive right now. But according to Tom Bill, head of U.K. residential research at real estate company Knight Frank, the coming months could be a good time to enter the market.

“If you’re looking at what the Bank of England does, the best time arguably is now,” he told CNBC’s Silvia Amaro.

This is because the Bank of England is likely done hiking interest rates — which determine the mortgage rates for millions of homeowners in the U.K. And although speculation has now shifted to when rates will be cut, Bill says mortgage rates are unlikely to fall sharply: “We’re talking about small movements downwards.”

The Bank of England, like many central banks around the world, has been hiking interest rates in an effort to cool the economy. Recent data, including inflation figures, has suggested that elevated rates are having their desired effect in bringing down prices — raising expectations that the central bank could begin cutting interest rates in 2024.

Sentiment improving in UK housing market: Knight Frank

Mortgage lenders are also keen to gain and maintain market share in what Bill says has been a “thin” year for the industry, adding downward pressure to mortgages.

Higher mortgage rates typically lead to a decline in house prices, and it’s a trend that has been reflected in the U.K., even though prices remain above pre-pandemic levels, according to Richard Donnell, executive director for research at property data firm Zoopla.

“Prices have fallen modestly by less than 5% with house prices still £40,000 higher than before the pandemic started in early 2020,” he told CNBC.

However, transactions have fallen by 23% this year, Donnell noted, and while this is not good news for the property market, it may be good for some buyers.

“The average sale agreed is at £18,000 less than the asking price, the highest discount for over 5 years.  This means it’s a good time to get into the market to negotiate harder on price with 40% more homes for sale than a year ago,” he said.

Why rent in London is out of control right now

The next six months

Rental outlook

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