Expert discusses some of the influencing factors
Predicting how an entire year will pan out in the housing market is never an easy task, with the last few years evidence of the unexpected events that can occur – from COVID to a mini-budget collapse - to throw plans awry.
However, with the market beginning to settle towards the back end of 2023, with some degree of stability filtering through as a result of the base rate being held and inflation continuing its descent, what do the prospects look like for 2024?
What is expected from the mortgage market this year?
Katrina Horstead (pictured), mortgage broker at The Mortgage Mum, said while the UK economy remains on an unstable footing, there are signs that the wider picture is beginning to settle.
“Mortgage rates are likely to continue to go down steadily in 2024, as they have been since the start of August,” she said.
This, Horstead said, has been helped by inflation coming down over the last few months, although the Bank of England has warned there is still a way to go before it hits its 2% target, with reductions in the base rate not expected until the end of 2024.
“Moreover, UK house prices are forecast to fall up to 4%, this however, could be seen as more of a price correction due to the increases we saw during 2020/21,” Horstead said.
If house prices do decline slightly throughout 2024, Horstead said this could create opportunities for buyers who were previously priced out of the market.
What could influence the mortgage market in 2024?
The UK mortgage market is influenced by various factors, all of which can shape interest rates, house prices, and overall mortgage demand.
Looking ahead to 2024, Horstead said changes in the Bank of England's base rate will have a profound impact.
“In the broader economic context, the health of the economy, encompassing GDP growth, employment rates, and inflation, play a pivotal role,” she said.
These factors collectively influence consumer confidence and, in turn, Horstead said, their capacity to take on mortgage debt.
Concurrently, she said that government policies pertaining to housing, ranging from first-time buyer schemes to tax incentives and regulations, contribute to market dynamics.
“Affordability remains a critical consideration, despite wage increases; the ability of individuals and households to meet mortgage repayments is directly affected by changes in income levels, employment conditions, and living costs,” Horstead said.
She added that mortgage accessibility is intricately tied to the criteria set by lenders. This, Horstead said, includes credit score requirements, loan-to-value ratios, and income assessments.
Beyond national borders, global economic conditions, such as financial crises or shifts in the global interest rate environment, Horstead said, exert indirect influence on the UK mortgage market. Demographic trends, encompassing population growth, migration patterns, and more, Horstead added, are also instrumental in shaping housing demand and mortgage trends.
Adding an environmentally conscious dimension, Horstead said, the increasing awareness of climate change may usher in the development of eco-friendly mortgage products and influence consumer preferences towards energy-efficient homes.
“This intricate interplay of factors paints a comprehensive picture of the multifaceted landscape of the UK mortgage market,” she said.
Monitoring these aspects, she explained, could offer insights into the potential direction of the market this year.
“Additionally, market conditions can evolve, so staying updated on current economic indicators and industry news as a mortgage broker is crucial,” Horstead said.
How are you expecting for the housing market to perform in 2024? Let us know in the comment section below.
