Buyer attitudes are changing, says broker expert
The mortgage market has turned a corner, but borrowers are approaching property transactions in a more pragmatic way and choosing not to stretch themselves financially, according to leading independent broker John Charcol.
Buyer attitudes shifted positively over the summer, said its mortgage technical manager Nicholas Mendes, despite some hesitancy around the time of the surprise General Election.
Mendes’ comments come as a new report from the valuation provider e.surv shows what it describes as a ‘summer lull’ in house prices. Last month, the average sale price of a home in England and Wales was just over £356,000 - nearly £1,800, or 0.5%, lower than the July average, and 2.6% lower than a year ago. Prices for England and Wales, as a whole, remained about 6% below the previous peak, in October 2022.
Data from e.surv’s house price index indicates that prices have nudged lower for six months in a row, but Mendes remains upbeat.
“I would argue that the market has indeed turned a corner, largely due to the recent bank rate reduction,” said Mendes (pictured). “Financial markets are already anticipating further cuts to the Bank of England‘s base rate, and as a result, swap rates for longer-term products, such as five-year fixed mortgages, have fallen more quickly.”
These lower swap rates reflect market expectations of future interest rate cuts, suggested Mendes, allowing lenders to offer more competitive fixed-rate mortgages.
How has 2024 been for the mortgage market?
The year began on a positive note, Mendes suggested, but in the face of still high(ish) mortgage rates in early summer, and a sudden announcement of the General Election, borrower sentiment had been cautious.
“Since July, we’ve observed a significant shift in buyer attitudes and motivations for the better,” he shared. “After the General Election and a reduction in the bank rate, lenders have responded with rate cuts, reigniting the market, and increasing borrower demand.
“Despite this, there’s been a noticeable change in how borrowers approach property transactions. During periods of historically low mortgage rates, home movers were eager to borrow as much as possible to secure their ideal homes. Now, as we become accustomed to a higher rate mortgage environment, affordability has become the priority for many. Larger mortgages have become less appealing, leading to more lateral moves or pragmatic decisions rather than financially stretching to move up the property ladder.”
Mendes believes many buyers will aim to balance their desire for a new home with the realities of higher mortgage repayments, but anticipates greater confidence ahead.
“As the rate continues to decrease, market confidence in further reductions will grow, encouraging lenders to reduce mortgage rates further,” he reasoned. “This will provide relief to homeowners and prospective buyers by making borrowing more affordable and stimulating housing market activity.”
The gap between two-year and five-year fixed mortgage rates is expected to narrow, Mendes said, with five-year rates potentially falling to around 3.5% and two-year rates dropping below 4% by the end of 2024.
“As lenders respond to lower funding costs and increased competition, we could see even more attractive mortgage deals,” he predicted. “This would not only provide financial relief to homeowners, but also encourage first-time buyers and motivate home movers, boosting both the housing market and the wider economy.”
Read more: Has the UK mortgage market finally recovered from Liz Truss?
What does 2025 hold for the mortgage industry?
Looking ahead to 2025, Mendes anticipates a further fall in mortgage rates, likely by around 0.5%, driven by ongoing base rate cuts and stabilising economic conditions.
“As confidence in the economy improves and inflation remains controlled, lenders will have greater flexibility to offer competitive rates,” he said. “This trend will make homeownership more accessible, encourage both new purchases and refinancing, and stimulate further growth in the housing market.”
According to the findings of e.surv’s house price index, the North East and North West are the only areas where average prices are currently rising in positive terms. The only other region registering a meaningful pick-up is London.
“We’ve recently noticed an increase in lender activity as brokers and applicants take advantage of lower mortgage rates following the BOE rate cut,” shared Richard Sexton, director at e.surv. “Historically, we also see a seasonal rise in activity between now and Christmas, though some may be cautious due to the government’s warnings of a challenging budget.
“What we know is that when consumers feel financially ready to move or buy a home, they tend to act. Looking ahead, a return to a more buoyant housing market by 2025 would not be surprising. As always, buyers and sellers are carefully weighing their decisions, and broker advice plays a key role in shaping those choices.”
