“With expected relaxations in affordability assessments, more people will find it easier to access mortgages. Such optimistic developments signify an increasing faith in the housing market and could result in a surge in buying homes”
– Pete Mugleston – Online Mortgage Advisor
The past year has seen the highest mortgage rates on record, influenced by high inflation, the closure of the Help to Buy scheme and increased costs of living, all of which have put the housing market in a unique position.
Looking to the future, Pete Mugleston, MD and mortgage expert at Online Mortgage Advisor give his thoughts on what the property market might look like throughout the rest of 2024.
A gradual decline in mortgage rates
As we head further into 2024 there is a strong indication that mortgage rates will slowly start to go down, which is great news for anyone who has been putting buying a house on hold. Right now, we’re seeing rates for a two-year fixed mortgage at about 5.95% and a five-year fixed at 5.57%, which is lower than before when you consider they were previously at 6.85% and 6.37% respectively.
We can thank this drop in rates to inflation falling by 3% this year. In the coming months, if inflation continues to fall, we’ll hopefully see mortgage rates drop even further but don’t hold your breath for the super-low rates that we saw previously. The likelihood is that rates won’t fall below 4% until the end of 2024, or even later.
A buyer’s market For 2024
Despite the high rates, 2024 presents a unique window of opportunity for buyers. With demand tapering off due to the higher costs, the market has seen house prices start to fall as people steer clear of buying property. This is supported by the Office for Budget Responsibility which predicted that house prices will decrease by 10% between 2023 and the end of 2024.
Some buyers will see this as a good opportunity to grab their dream house at a discount, assuming they can manage the higher mortgage payments for a short period of time. There is also the possibility of rent rising in the coming months as landlords pass on rising costs to their tenants, which may tempt more buyers into the market.
High demand for energy-efficient properties
As the cost-of-living crisis continues, and with energy prices to heat homes hitting record highs this past winter, it comes as no surprise that there will be an increasing demand for energy efficiency when people look to rent or buy a house. Homeowners and developers who invest in energy-saving measures, such as improved insulation, high-efficiency heating systems and solar panels, can expect their properties to be more attractive to the market.
Increase in mortgage approvals
As the UK works to recover from the latest recession, it’s likely that the number of mortgage approvals will gradually rise. This is because lenders are more confident in the stability of the market and the ability of borrowers to repay loans. With expected relaxations in affordability assessments, more people will find it easier to access mortgages. Such optimistic developments signify an increasing faith in the housing market and could result in a surge in buying homes.
New-build boom to help first-time buyers
The anticipated increase in newly built properties entering the market could play a crucial role in addressing the housing supply shortage and allow many first-time buyers to get their foot on the property ladder. Alongside these developments, initiatives like the Yorkshire Building Society £5,000 deposit scheme are anticipated to not only become more popular in the coming year but also enable more individuals to acquire their first home.
This Innovative scheme allows first-time buyers to secure a property valued at up to £500,000 with just a £5,000 deposit, offering a much-needed lifeline to those struggling to save for a larger deposit while renting. However, first-time buyers should do their due diligence and make sure that they are in a stable financial position and can afford the monthly repayments.
