As the UK housing market emerges from its holiday slumber, there is a renewed sense of optimism for the final quarter of 2023. Unlike the previous year, when mortgage rates soared and lenders pulled numerous products from the market, 2023 ended on a more positive note. With inflation below 4%, the focus has shifted from whether rates have peaked to how many cuts can be expected in 2024. Money markets have already factored in five cuts of 0.25% for the coming year.
This positive outlook is further reinforced by mortgage lenders themselves, who have responded to the economic landscape by slashing rates. Major lenders such as the Halifax and Leeds Building Society have made significant cuts, and HSBC has introduced a sub-4% five-year fixed rate. These rate reductions apply to all loan-to-values and mortgage types, making it encouraging news for buyers and sellers alike.
Simon Gammon, the head of Knight Frank Finance, believes that these rate cuts are a strong indication of lenders' efforts to stimulate the market after a lackluster 2023. While the best rates currently hover around 4%, Gammon predicts that rates starting with a 3 will soon become available. However, he also emphasizes that considerably lower rates may not be on the horizon for the immediate future.
This changing landscape has led economists to revise their house price forecasts for 2024. The Halifax announced that house prices rose by 1.7% in 2023, highlighting the positive trajectory since the previous summer, when a 5% decline seemed imminent. The potential demand for housing in 2024 could receive a further boost from pre-election measures, including tax cuts and initiatives to assist first-time buyers with longer fixed-term mortgages, smaller deposits, and a revived help-to-buy scheme.
In addition, the speculation that the election will take place in the latter half of the year, as hinted by Rishi Sunak, the Chancellor of the Exchequer, adds another dimension to market dynamics. As more people transition from favorable fixed-rate deals in 2024, significant growth and rising supply are expected, along with the anticipated uncertainty surrounding the election itself.
Despite the uncertainties surrounding the political landscape, the UK housing market is well-positioned to build upon its strong finish in 2023. The final quarter of last year witnessed a notable increase in demand compared to the previous year, driven by the falling borrowing costs. In fact, the number of offers made across the UK in October 2023 was 15% higher than in 2022.
Image: UK Housing Market Set for Strong 2024 as Mortgage Rates Fall
While ideological divisions within the Tory party concerning immigration may impact the election timetable, the effect on the housing market is expected to be minimal. The political splits that arose from the Brexit vote in 2016 may widen further in 2024; however, they are unlikely to have as pronounced an impact as the quadrupling of five-year fixed mortgage rates between 2021 and 2023.
In conclusion, with mortgage rates on the decline and a positive economic outlook, the UK housing market is set for a robust performance in 2024. Buyers and sellers can look forward to favorable conditions, while economists revise their house price forecasts in anticipation of a thriving market. As the year progresses, it will be interesting to observe how the market navigates the uncertainties of the political landscape and capitalizes on the opportunities that lie ahead.
