Expert says outlook "not as negative as it was" this time last year
In the ever-changing landscape of the UK mortgage market, 2024 is anticipated to kick off with potential shifts in both house prices and mortgage rates, following a year marked by fluctuations.
While official data in September recorded the first annual fall in house prices in a decade, recent months have witnessed growing demand, creating uncertainty about what the new year holds for prospective homebuyers.
In an article recently published by The Guardian, experts offered insights into the probable trajectory of mortgage rates and the housing market in 2024.
According to them, mortgage rates may experience a noteworthy start to the year, driven by a larger-than-expected drop in UK inflation in November. This drop has intensified the downward pressure on borrowing costs, leading to speculation that the Bank of England might consider cutting interest rates as early as spring 2024.
Fintech mortgage lender Gen H has already responded by offering a five-year fixed rate mortgage below 4% for the first time since May, signalling a potential trend for more cuts in the coming year.
It was also pointed out that homebuyers with small deposits can benefit from considerably lower mortgage rates compared to a few months ago, with the average two-year fixed rate at 95% loan-to-value (LTV) standing at 6.21% as of December 21, down from 7.1% in August. The competitive landscape and improving rates may encourage more activity in the market throughout the year.
In terms of product choice, there has also been an improvement, especially for borrowers with a 5% deposit. As of December 21, they can choose from 251 mortgage deals, up from 144 in December of the previous year. Additionally, a decision to extend the government’s mortgage guarantee scheme until June 2025 provides lenders with the opportunity to offer guarantees on riskier portions of mortgages, further aiding borrowers with lower deposits.
While competitive rates are available for those with larger deposits, a potential government initiative might facilitate long-term fixed-rate mortgages. However, experts caution that rates on such mortgages may not be the most competitive in the market.
Concerning house prices, predictions for 2024 vary, with Nationwide and Halifax foreseeing moderate declines. The impact of any scheme supporting first-time buyers is expected to stabilize prices. Housing market analysts suggest a fragmented market, with outcomes influenced by factors such as price point, location, and the broader economic landscape.
Experts believe the key driver for house prices remains the economy, with local variations depending on business investment and employment levels. Rising interest rates have impacted affordability, but not as severely as anticipated, as borrowers offset the rise through longer mortgage terms and increased monthly payments.
As the market navigates uncertainties, they said the upcoming March budget could see measures aimed at easing the path for first-time buyers, providing a glimpse into the evolving dynamics of the UK property market in 2024.
“The outlook is maybe not as negative as it was looking this time last year,” Neal Hudson, a housing market analyst at consultancy BuiltPlace, was quoted as saying in The Guardian report. “I think it will depend on local markets and what type of property you are looking for.
“In the part of the market where people are after smaller homes, there is a lot of competition. For bigger, more expensive properties, there are more available. People can’t get the big mortgages that they were getting in the post-pandemic race for space, and so those homes are not selling.”
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