UK homebuyers and homeowners are keenly observing the Bank of England’s moves, particularly its Base Rate announcements, which have a significant impact on mortgage rates. Last year, the mortgage market saw dramatic changes, influencing monthly repayments and overall affordability. As we head through 2024, several factors including mortgage rates, house prices, and buyer affordability are shaping the property market. Zoopla has published a detailed look at what to expect this year.
Mortgage Rates – A 2024 Outlook
In June of the previous year, mortgages hit a peak, especially for those looking into a five-year fixed-rate loan at a 75% loan-to-value ratio, which soared to 5.8%. This meant that both buyers and existing homeowners had to dig deeper into their pockets, adding hundreds of pounds to their monthly mortgage repayments.
Fast forward to today, and there’s a silver lining as the average rate for the same mortgage type has taken a dip to 4.4%. However, for those hoping for rates to plummet below 4% in 2024, the outlook might not be as optimistic. According to Richard Donnell, Executive Director of Research at Zoopla, the anticipation of lower interest rates has already been factored into the current fixed-rate mortgages. The trajectory of these rates will largely depend on the future movement of the base rates, which are projected to decrease to 3.5% by the end of 2025. This suggests that mortgage rates are expected to hover around the 4% mark for the foreseeable future.
Improving Buyer Affordability in 2024
Despite the mortgage rate predictions, there’s good news on the horizon for buyer affordability. A key factor contributing to this positive shift is the expected rise in wages coupled with steady house prices. This dynamic is fostering an environment where buyers feel more confident about entering the market. Donnell highlights the increase in household disposable incomes, projected to grow by 3.5% throughout 2024, as a primary catalyst for enhanced housing affordability. Meanwhile, house prices are predicted to remain stable, offering a balanced playing field for potential buyers.
Moreover, the housing market is gaining momentum, evidenced by a 9% year-on-year increase in the number of sales agreed. This uptick is encouraging more sellers to list their properties, subsequently enriching the market with a broader selection for buyers.
A Year of More Choices for Buyers
Currently, the property market is bustling with a 20% increase in available homes compared to spring 2023. Estate agents are reporting an average of 30 homes on their books, returning to pre-pandemic levels. This surge in inventory is empowering buyers with more options and leverage in negotiations, particularly in instances where properties aren’t attracting attention quickly. Donnell believes that this abundance of choice will help keep price rises in check, maintaining a balanced market.
Focus on Affordable Areas
The allure of affordable regions continues to dominate buyer preferences, especially in times of challenging mortgage rates. Notably, areas like Yorkshire and the Humber, along with the North West, are witnessing substantial growth in sales activity. This trend is also reflected in the increase of new sellers in the South West and North East, contrasting with a modest rise in London’s housing supply. The capital, however, is experiencing a quicker rebound in house prices due to heightened competition among buyers.
Narrowing Discounts and Steady House Prices
As the market steadies, the window for negotiating substantial discounts is gradually closing. The proportion of sellers offering discounts of 5% or more has decreased from nearly half to two-fifths. Consequently, the average discount has shrunk, aligning with a market that’s beginning to find its equilibrium.
A Year of Stability and Opportunities
As 2024 unfolds, the UK housing market is settling into a phase of stability and growth. While mortgage rates might not see a dramatic decrease, the overall improvement in buyer affordability, bolstered by rising incomes and steady house prices, presents a favorable environment. The increased property listings offer more choices, ensuring that there’s something for every buyer.