The information contained within was correct at the time of publication but is subject to change
The UK mortgage market continues to be unpredictable, shaped by various economic factors, government policies, and global events. The key element of the mortgage market that is influenced by these factors, and which continues to influence homebuyers and lenders alike are the fluctuations in interest rates.
In this article, we take a look at the market in 2024, exploring the current trends in interest rates and sharing our insights to help you navigate the ever-evolving housing market.
Understanding the Current Mortgage Market
In January 2024, Nationwide reported that house prices rose by 0.7%, bringing the annual growth rate to -0.2%. This has meant that house prices have remained relatively stable of the last 12 months. Interestingly, even though average monthly borrowing costs remain much higher compared to the beginning of 2022, it hasn’t impacted house prices significantly. There have, of course, been fluctuations during the year in house prices, but the figures show that at the year-end, the housing market remains relatively steady.
Supporting the stability in house prices is the fact that both supply and demand have been on the rise. The January RICS survey revealed that a majority of surveyors reported an increase in both supply and demand, marking the first time since March 2021. This balance has resulted in little pressure for house prices to go up or down.
The increase in demand is accompanied by an improvement in consumer confidence, which reached a two-year high in January, according to market research company GfK. With concerns of a major recession falling, and inflation trending downwards, consumers are feeling more optimistic, despite the usual doom and gloom in the media.
Growing demand hasn’t yet translated into tangible activity levels though. HMRC reported that completed transactions in December 2023 were 16% lower than the average from 2017 to 2019. Mortgage approvals in December saw a slight increase, but were still 22% lower compared to their pre-pandemic average, according to the Bank of England. That said, lenders must balance their concerns about market performance and the messaging coming from the Bank of England with their need to lend money at affordable rates.
Overall, this combination of factors in the mortgage market has contributed to the steady state of house prices despite the fluctuations in borrowing costs.
Interest Rate Trends
The drop in mortgage interest rates has fueled the growing demand in the mortgage market. However, lenders are now cautious about making further rate cuts until the future of interest rates becomes clearer. Let’s not forget that at the last Bank of England Base Rate review, three of the Monetary Committee voted to increase the Base Rate.
Interest rates are currently outperforming forecasts too. The Bank of England estimated that rates would stay above 5% until quarter 3 of 2024, but they actually fell to 4.78% by the end of 2023. The latest BofE forecast estimates that rates will fall to 4.65% by the end of 2024.
This is good news for households and investors, but it’s too early to relax just yet as inflation, whilst falling, remains at 3.99%, almost double the Bank of England’s target of 2%, which still leaves the door open to rises in the Base Rate of Interest to tackle inflation.
Strategies for Navigating the Mortgage Market
- Monitor Interest Rate Trends: Stay informed about current interest rate trends and economic developments that may impact mortgage rates. Utilise reputable financial news sources, economic indicators, and market analysis to gauge the direction of interest rates and make informed decisions.
- Consult with Mortgage Professionals: Seek guidance from mortgage lenders or financial advisors who can provide personalised insights and assistance tailored to your specific financial situation and goals. Mortgage professionals can offer advice on timing your home purchase or refinance to optimise your financial outcomes.
- Evaluate Financing Options: Explore a range of mortgage products and financing options to find the most suitable terms and rates for your needs. Consider factors such as fixed-rate versus variable-rate mortgages and other products, loan duration, and deposit requirements.
- Plan for Long-Term Stability: Factor in potential changes in interest rates and housing market conditions when making decisions about homeownership. Take a holistic approach to financial planning, considering your long-term goals, risk tolerance, and overall financial stability.
And Finally...
In 2024, the mortgage market presents an ever-changing landscape shaped by economic, financial, and geopolitical factors. By staying informed, consulting with experts, and carefully evaluating your options, you can make informed decisions to achieve your homeownership and financial goals while adapting to the evolving mortgage market with confidence.
For advice and guidance on your residential mortgages drop a member of our team a line, and we can take a look at your personal circumstances and help you find the best mortgage and protection products to suit your needs.
Liddle Perrett Ltd is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE