House prices fell for the sixth consecutive month in February, down by -0.5%, according to Nationwide. Prices are now down -3.7% from their pre-mini budget peak last August, and down -1.1% on an annual basis.

Completed sales volumes remained relatively strong in January, down just -3.2% compared to the pre-Covid average for the month reflecting a pipeline of 2022 agreed sales. New mortgage approvals in January were at their lowest level since 2011, -40.8% down on their pre-Covid average for the month, according to the Bank of England, a low yet to be reflected in completed sales figures.

The imbalance between supply and demand, a key driver of value growth, is correcting. The ratio of new sales to new instructions across the market as a whole has returned to pre-Covid levels, according to TwentyCi. The February RICS survey also supports this, showing demand still dropping more rapidly than supply.

The weakening activity is a direct consequence of higher mortgage rates. Another rise to the base rate could be on the cards, potentially above what has already been priced in by lenders and this could stall the current downward trend in mortgage rates.

These high interest rates are particularly deterring mortgaged home movers, with their numbers in December down by -6% compared to their 2017-19 average for the month. As they are often more discretionary buyers, there is little incentive for them to move while mortgage rates are high and the economic backdrop is uncertain.

First time buyers have remained undaunted so far, with their numbers 8% higher in December than the pre-Covid average. Despite the challenges of securing a mortgage with the current high rates, high levels of rental growth and fierce competition for rental stock provide them with a strong incentive to access the housing ladder if they can.

Cash buyers numbers are similarly robust, up 10% in November on their pre-Covid average. Their immunity to the high rates has provided some additional strength to the market, particularly at the upper end.

Annual house price growth was strongest in Torridge in Devon and Hastings, up 17.9% and 17.6% respectively. Aberdeen continued to be the only district seeing price falls, down -3.2%. However, local measures of house price growth are lagged and are not yet picking up the most recent three months of house price falls.

Annual rental growth across the UK continued to slow in January, with rents up 11.1% from this time last year. The rate of annual growth slowed across all regions, except for the East of England and Scotland, according to Zoopla.

Despite slowing for the sixth consecutive month, annual rental growth in London remained above 15.2% in January, this is being driven by excess tenant demand and a shortage of supply in the capital. Rents in the city have recovered from falls during the pandemic and are up 18.9% since March 2020, but still lag behind national growth of 20.2% over the same period.