We are now into the third month of the year and the level of appointments coming through our doors each week continues to be high, with a significant number of these initial mortgage enquiries now converting to a live file.

The whole feel for the market has changed radically from the past eighteen months of inactivity, and sales are now being agreed across the whole range of the market from one-bedroom flats to large family homes.

REDUCTIONS IN ASKING PRICES

It is apparent however that vendors who wish to move forward with their life plans have now come to acknowledge that they have to significantly review their expectations of selling at the prices that prevailed when the market peaked, and then crashed. Some reductions are surprising, and we have seen any number of sales that have been agreed with a reduction of up to 20%, sometimes more.

EASIER ACCESS TO MORTGAGES

This now means that purchasers, who until recently have been unable to afford a mortgage due to high asking prices, are now able to transact because they are starting to fit the stringent stress tests that all lenders have been forced to impose since base rate started to climb.

Bank of England decisions in respect of base rate are dictated by the rate of inflation which meant that when this was in double figures, base rate rose steadily until it reached its current peak of 5.25%. The rate of inflation has now fallen significantly, and base rate will start to be reduced if inflation remains low.

RATE CUTS FOR THIS YEAR

The current projection by economists is that three rate cuts will be introduced in 2024, with base rate finishing at 4.5%. If this happens, then actual mortgage rates are likely to fall below 4% which is great news for the market, although as ever a lot can change in nine months.

Whether interest rate expectations rise or fall from where we are today will depend entirely on data which in turn is produced as a result of world events. If inflation continues to be persistent, base rate will remain higher for longer. If inflation falls to 2%, the target imposed by the Bank of England, then we can expect to see rates starting to fall, albeit steadily.

LOW INTEREST RATES ARE HISTORY

Looking to the future, it is apparent that the era of super low interest rates is over, and this will naturally take some getting used to as the population will have to adjust its expenditure on such things as new cars, holidays and eating out as it becomes necessary to devote a larger proportion of earned income to providing a roof over their heads.

The extremely low mortgage rates that we have enjoyed since November 2008 until base rate started to rise in February 2022 can best be regarded as being the ‘’abnormal’ ’rather than the norm, and it is likely that we will see a return to the rates that were prevalent before 2008.

THE MARKET – A WIDE CHOICE

Looking at the local market in early March, places.je were advertising 1,372 flats and houses, of which no less than 389 were below £500,000, many with more than two bedrooms and car parking. A further 268 were for sale in the range £500,000 to £700,000, and a number of these were houses, with gardens and parking.

JERSEY HOUSE PRICE INDEX

In February, Statistics Jersey released the results of the House Price Index for quarter 4 of 2023. This report is always well presented, although with the information that is currently available to the statisticians, it is unable to provide a totally factual picture of the housing market other than to comment on trends, with the Index showing a reduction of 3% when compared to 2022.

What is needed is comment on the way flat and house prices are falling with a record of advertised prices from 12 months ago and the percentage by which the same properties have fallen in value and are still too expensive to attract a buyer. There is interesting comment in the middle of the report which focuses on affordability

For 2-bedroom flats, it is suggested that prices will need to reduce by around £140,000 or 28% before such a property would be considered affordable to a household with a mean income. For a 3-bedroom house, the reduction would have to be around £405,000 or 53%.

BEST RATES FOR MARCH

Looking at interest rates this month, there have been reductions in the fixed rates offered by some of the mortgage providers, which will help to stimulate the market. Currently, the most important point to consider centres around whether to lock into a fixed rate for five, three or two years, or to opt for a two-year tracker rate that will follow base rate either up or down.

It is possible that further reductions will be made later in the month.

Bank of England Base Rate 5.25%

• 2-year Tracker rate 60% LTV - March 2024 5.95% (February 2024 5.95%, January 2024 6.04%)
• 2-year Fixed rate 60% LTV - March 2024 5.39% (February 2024 5.74%, January 2024 5.79%)
• 2-year Fixed rate 90% LTV - March 2024 5.69% (February 2024 6.04%, January 2024 6.22%)
• 5-year Fixed rate 60% LTV - March 2024 4.89% (February 2024 5.14%, January 2024 5.39%)
• 5-year Fixed rate 90% LTV - March 2024 5.34% (February 2024 5.34%, January 2024 5.81%)

Rates correct at 04.03.2024