This time last month, we were waiting for outcome of the General Election, and we were interested in how it would affect the sales of windows and doors.
We acknowledged that this month’s Business Pilot Barometer figures would be affected by that outcome – not because a particular party got into power, but simply because an election had taken place.
Moving beyond a period of uncertainty could give homeowners – as well as other private investors and local authorities – the confidence to invest, providing a boost to our industry in the process.
But we also recognised that many other factors were playing a part in people’s spending habits, such as the packed summer of sport, holidays away, and an expectation that the Bank of England will lower the base rate of interest during the summer – high streets banks were already lowering mortgage rates in anticipation at the beginning of July.
The result? The headline figures are positive. Sales are up in July to 55.5, which is an 11.7% increase on the previous month, and 23.9% than the same period last year.
Leads are also up, this time by 13.9% on the previous month to 114.7, and 27.6% higher than the same period last year.
This is significant because it lays the ground for next month, and these figures were gathered before the Bank of England interest rate announcement at the beginning of August, suggesting that confidence is returning.
Another key figure is the average order value, which dropped by 34.9% to £3,993.
It is widely accepted (and we see it in our own figures) that wealthier homeowners are less affected by the wider economic conditions, and will make purchasing decisions regardless of the current interest rates or house prices. The result is that the average order value tends to increase as overall leads and sales fall.
But the converse is also true: as overall confidence returns to the market, the average order falls as more people press ‘go’ on projects they had paused until conditions improved.
Last month, I said: “…a reduction in the base rate could be a starting pistol being fired as cautious investors (including homeowners) decide the time is right to resume spending.”
The figures suggest that homeowners were resuming spending (or, at least planning to) ahead of the interest rate announcement by the bank. So, is there anything to suggest that this shouldn’t continue into the second half of 2024?
The biggest news this month is the Bank of England’s decision to cut interest rates to 5% from 5.25%, the first reduction in borrowing costs in over four years.
This decision was influenced by inflation falling back to its 2% target in May and June this year, and it will ease pressure on UK borrowers if mortgage lenders pass the cut on.
According to the Nationwide, house prices have increased by 2.1% over the course of 2024, the fastest pace since December 2022, which is often seen as an indicator of confidence.
Some people were feeling more confident about getting a mortgage as their pay packets went up, Nationwide chief economist Robert Gardner said.
But relatively high mortgage rates and affordability issues also acted as a brake for prospective buyers.
But, along with the BofE rate cut, the government announced pay rise for public sector workers, which could represent £9.4 billion going into homeowners’ pockets.
We didn’t win the Euros, but that didn’t appear to dampen our spirits. This next step is to ensure your business is set up to make the most of a possible uptick in homeowner spending.
