Housing supply has eased since the beginning of the year ahead of the key spring buying season, but buyers “remain hesitant as economic risks linger,” according to Knight Frank.  

New listings were more than a fifth higher than the five-year average last month, according to the property agent Knight Frank and Rightmove. 

Added to this, the industry mood in the run up to the New Year had begun to lift after Chancellor Rachel Reeves October Budget, “which sent mortgage rates higher and confidence lower,” said the agent’s head of UK residential research Tom Bill. 

But he points out that buyers have started the year “in more circumspect mood as they wait for better news on mortgage rates”.  

The number of new prospective buyers registering in the UK in January was 12% below the five-year average, Knight Frank data shows. 

Bill’s note comes after the Bank of England cut the base rate by 0.25% to 4.50% last week, a move which some industry observers say was already priced in by mortgage lenders. 

He says: “Buyer caution is understandable when the outlook is so mixed.” 

The agent points to the five-year Sonia swap rate, used to price fixed-rate mortgages of the same length, which was 3.8% last Thursday, having risen from under 3.4% in September. 

“Last week’s [Bank of England] rate cut will provide a short-term lift to sentiment, but mortgage costs are unlikely to fall by much when lenders are operating on such tight margins,” says Bill. 

He adds that the central bank’s rate reduction managed to “muddy the waters” by raising the “spectre of stagflation.”

The Bank slashed its 2025 growth forecasts made in November to 0.75% from 1.5% and predicted that inflation will rise from its current 2.5% level to 3.7% in the third quarter of this year. 

Pockets of the homebuying market are buoyant, but this mood will be tested as the spring buying season approaches, which coincides with the end of lower stamp duty thresholds.

Knight Frank head of the country business at James Cleland says: “Demand has picked up more notably in the Home Counties near London. As spring approaches, this typically then spreads to the rest of the country, which is a positive sign for the next few months all else being equal.” 

But Bill points to headwinds over the coming months. 

He says: “The UK could still get caught in the crossfire of a trade war between the US and the EU that feels likely to escalate. 

Bill adds: “A key date will also be 26 March, when the Chancellor delivers her spring statement and the Office for Budget Responsibility issues new growth forecasts. Will she be forced to cut spending or raise taxes to recoup financial headroom? 

“The optimism building in recent weeks has been more down to the absence of bad news than the presence of good news.”