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Mortgage rate cuts

January is going to be a better month for borrowers. Lenders begin the year with fresh targets and swap rates have been easing since late October, paving the way for mortgage rate cuts.

TSB and Nationwide are first out of the blocks, according to . TSB will cut its five-year fixed rate products for both purchase and remortgage by a sizable 1.3% from Monday. Those remortgaging at 60% LTV can apply for a five year deal at 4.99%. Nationwide will cut some of its fixed rate products by 0.6% from today.

The best fixed rate deals can now be found around around 4.5% and mortgages starting with a four are likely to be where the market settles, barring any shocks. Forecasts published by the Office for Budget Responsibility in November suggest that the average mortgage rate paid by homeowners will be around 4.6% in 2027.

Mortgage approvals for house purchase fell steeply to 46,100 in November, down from 57,900 in October, according to published on Wednesday. That's the lowest level since June 2020, though the proximity to the mini-budget makes the data of limited use for assessing the trajectory of the housing market. For that, I recommend this piece by Tom Bill.

Consumer demand

Shopper numbers across the UK in December rose 5.8% compared to November and were up 9.9% compared to 2021, according to covered by Reuters.

It's another signal that consumer demand may hold up better than anticipated - as predicted by Stephen Springham in his outlook for 2023. Nominal consumer spending is forecast to grow 9.3% overall this year, dipping -0.7% in real terms. We tentatively forecast retail sales values (exc fuel) will grow 4% in 2023, above long run averages. We expect volumes to fall 4%.

Occupier markets held up well during 2022 and that's likely to continue this year, according to Stephen. "The wheat has effectively already been separated from the chaff during the pandemic," he says:

"Trading will undoubtedly become far tougher in 2023 than it has been in 2022, particularly in terms of rising operating costs. But most retailers are much fitter than they were coming into previous recessions and while by no means immune to the storm, they at least have stronger defences. There will undoubtedly be casualties, but maybe fewer than the market is anticipating."

China's red lines

The Chinese government in 2020 introduced debt limits for real estate developers that exacerbated a nation-wide property slowdown.

The policies, summarised neatly by the Washington Post, became known as the "three red lines", and prevented net debt exceeding equity, the value of liabilities running higher than 70% of assets, and cash running lower than any short-term borrowings.

Early this morning Bloomberg that the government will now relax some of these restrictions, including the cap on borrowing. It's a big move that underlines how far the government will go to support a sector that accounts for approximately a quarter of GDP.

We've published a for the broader Asia-Pacific region this week. Both residential and commercial markets are at an inflection point, Christine Li writes in . We expect to experience a period of adjustment in 2023 while investors, occupiers, lenders, and developers appraise the new landscape for values.

Ski homes

The pandemic-induced surge in demand among homebuyers to be close to nature has been a boon for ski-home markets. The average price of a four-bedroom chalet across the 23 alpine markets we track climbed 5.8% during the year through June 2022, the fastest rate of growth for eight years, according to our .

We expect these markets to cool in the next 12 months. That鈥檚 not to say we expect prices to fall, in times of volatility and uncertainty the security of the Swiss Franc is likely to come to the fore once more, along with the value and accessibility offered by the French resorts. But after three stellar years, the economic headwinds will start to weigh on buyer sentiment in the Alps and globally, prompting the rate of annual price growth to slow.

That will provide better opportunities for buyers. Kate Everett-Allen outlines her top five opportunities this morning, from France's VAT rebate for new homes to the newly introduced Swiss hotel-style residence known as a 鈥榬ésidence hotelière鈥�. For those wanting to dig deeper, Kate and the team will be hosting a webinar at lunchtime on January 26th.

In other news...

Faisal Durrani on rising sales in Dubai's Burj Khalifa.

Elsewhere - Fed wants 鈥榤ore evidence鈥� of easing inflation and backs fresh rate rises (), Thatcher property revolution undone by plunging home ownership (), inflation crisis is coming to an end, says Next boss (), and finally, BlackRock extends block on UK property fund redemptions ().