Lloyds Banking Group, who are behind Halifax and recognised as Britain’s premier mortgage provider, recently shared some crucial insights on the future of UK house prices. According to their predictions:

• 2023: By the end of this year, house prices across the UK will have seen a 5% decline.
• 2024: A further dip is anticipated, with prices expected to decrease by another 2.4%.
• From Peak to Now: When you aggregate these figures, by the end of 2024, UK house prices would have experienced an 11% drop from their zenith last year. It’s crucial to recall that this peak was spurred by a frenzied demand for more spacious homes, post the initial wave of the COVID-19 pandemic.

When Will the Tide Turn?

For those waiting for positive news, Lloyds predicts that we might start witnessing the initial signs of recovery in 2025. Their economists project that house prices could see a 2.3% uptick that year.

William Chalmers, Lloyds’ Chief Financial Officer, commented on the softer housing market in 2023 compared to previous years. He noted, however, that this dip is part of a broader trend where the market is essentially recalibrating after several years of growth.

The Larger Financial Picture: Lloyds’ Financial Health

Beyond the housing market, Lloyds has indicated that their finances are under some strain, primarily due to increased interest payouts to their savers. A key metric to understand here is the net interest margin. This represents the difference between what banks earn from loans, like mortgages, and what they pay out to savers.

For Lloyds, this margin has experienced a dip, moving from 3.14% to 3.08% in the last quarter. This is attributed to challenging mortgage and deposit pricing conditions. Chalmers expects this trend to persist into the next quarter.

The Competitive Landscape

The financial backdrop for banks is evolving. Increased competition is prompting lenders to slash their mortgage rates. At the same time, with savers continually seeking better returns on their deposits, banks are compelled to offer more attractive interest rates.

Furthermore, there’s an external dimension to this scenario. Earlier in the year, regulators and political figures pointed fingers at banks. They argued that banks were not passing on interest rate hikes to their savers at the same rate they were imposing them on borrowers.