Bright horizon for UK property?

The housing market slumped for much of last year, as rocketing mortgage rates and equally worrying inflation dragged down demand.

After months of soaring prices, the market looked set to head back down, albeit with a gentle slide, rather than a crash. People were staying put rather than buying, making offers rather than paying an inflated asking price – or simply finding that the first rung of the mortgage ladder was still out of reach.

But is the smile about to return to estate agents’ faces?

Is the market picking up?

Increases in interest rates imposed by the Bank of England to contain inflation certainly had an effect on the housing market. When monthly repayments doubled or tripled, the affordability of, and enthusiasm for, large mortgages waned rapidly.

Fewer people were able to pay high property prices. Worries about future rate rises reduced confidence still further.

It meant that far fewer people were buying homes, and those that were, were wary of paying too much.

But that might have changed. Research from the Royal Institution of Chartered Surveyors (RICS) suggests that buyer and seller sentiment may be turning more positive. There’s a general feeling that interest rates have peaked, with the Bank of England now ready to consider taking the handbrake off on economic growth to counter recession.

People may be a little more optimistic about the future, and sales volumes are on the rise.

Competition among lenders has already brought mortgage rates down. Action from the Bank of England may take them down further. The prospect of lower rates has helped to boost the number of agreed sales.

Rightmove and Zoopla have also reported increased demand.

But what about prices?

There are more people prepared to buy a home than there have been for months or years. But what are they prepared to pay for them?

It looks as though more potential buyers could mean higher prices being achieved. The Nationwide building society’s house price index shows that the falls in prices of the last few months are starting to be reversed.

January can be a difficult month to base a view of the market on, because volumes of sales are traditionally low at this time of year. However, across the UK, house prices rose by 0.7% in January, after taking account of seasonal effects. This resulted in an improvement in the annual rate of house price change from -1.8% in December to -0.2% in January.

The price rises could be continuing. The average price of a home jumped by more than £3,000 month-on-month during February, according to Rightmove. 

In other words, house prices appear to have stopped falling – and could be on their way back up.

A spokesman for the Nationwide talks of optimism that the Bank of England will reduce rates in the month ahead as one of the key factors in this market turnaround. Cutting the cost of mortgage repayments could put a new home in the reach of more people.

At the end of 2023, a borrower on the average UK income buying a typical first-time home with a 20% deposit would need to budget for a monthly mortgage payment equivalent to 38% of take-home pay – well above the long run average of 30%. If mortgage rates go down, that painfully high cost could be eased.

It has to be remembered that the house market shows some large regional variations

East Anglia and the West Midlands are still seeing prices depressed, while all other parts of the UK are now expected to see some uplift in house prices over the year to come.

What happens now?

A rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive. 

However, the hope for reduced rates and consequent increases in prices has to be viewed with more balanced questioning of the economic outlook ahead.

The property market is still dealing with tough economic conditions. If economic growth remains stagnant, or falls leading to weakness in the jobs market and putting housing market activity back down, house prices could still fall this year.

What should you do?

If the falls in house prices really are over, it could be time to look at a move. There could still be bargains to be had, if you can secure the most suitable deal for your mortgage.

At Continuum we aim to stay well informed about the various deals offered by different lenders and we can help you find the one that is most appropriate for you.

Whatever happens to the housing market in the rest of 2024, the chances are that you could be better off with some expert mortgage help from us.

To see how you could make the most of a move, or cut the cost of staying put, call us today.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage strategy, you should seek independent financial advice before embarking on any course of action.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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