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  • Writer's pictureElliot Leigh

2024 Predictions: Inflation & Mortgage Rates

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The past year has been ever-changing in terms of the UK housing market, with price fluctuations seen throughout. In September, we saw the first annual drop in housing prices for over a decade which was shortly followed by a bigger than expected drop in UK inflation. With recent noise about a Government scheme to help first-time buyers, what’s to be expected within the housing market in 2024?

Dropping mortgage rates as we enter 2024

In November, we saw a bigger than expected drop in inflation leading to downward pressures on the cost of borrowing which has been welcome news to many first time buyers and those looking to re-mortgage. Already, 2024 is seeing lowering mortgage rates - for the first time since May, we have seen mortgage rates below 4%. A small lender, named Gen H, is offering rates of 3.99% for loans up to 60% loan-to-value (LTV), carrying a £999 fee. Many are hopeful that this drop in mortgage rates will set the tone for many other lenders to drop their rates but, of course, this is dependent on the money market swap rates remaining consistent. The drop also brings speculation that the Bank of England may cut interest rates as early as Spring 2024. 

In current market conditions, those with small deposits are also able to benefit as mortgage rates at this end of the market are down significantly in comparison to just a few months ago. According to Moneyfacts, the average two-year fixed rate at 95% LTV, for someone who can only raise a 5% deposit, stood at 6.21% in December in comparison to 7.1% only 4 months prior. 

There has also been a huge improvement in products offered, particularly to those with a 5% deposit. At the end of 2023, there were 251 mortgage deals on offer for these lower deposits, compared to only 144 at the end of 2022. Furthermore, the government has announced an extension of their mortgage guarantee scheme until June 2025 which will allow lenders to offer guarantees on riskier mortgages.

Are housing prices set to fall?

Whilst the UK’s biggest lenders, Halifax and Nationwide, have predicted price falls in 2024, it is unlikely the UK will see a market crash. Instead, it is believed that the year will be full of rises and falls depending on location and price, with Nationwide predicting a “low single-digit decline”. However, the introduction of schemes that bring new buyers into the market have the potential to cause a slight rise as demand increases. Buyers have begun to adopt different strategies, such as considering different areas and reviewing all their financing options in order to enter the market.

Essentially the key driver for housing prices will inevitably be the economy. Whilst it may unfold at a local level, rather than regional, if the country faces a recession and unemployment begins to drop, it is expected that the market will fall. House prices are not looking as negative as it was once thought though. This is due to falling inflation and interest rates reaching a peak. Of course, it is dependent on what area of the market you are looking in - there is still lots of competition for smaller homes as people are not able to get the mortgages they once could to be able to secure a larger home.

If you are considering buying a property for a buy-to-let purpose, you can find the benefits of our Guaranteed Rent Scheme here. Don't hesitate to get in contact to find out the monthly rental income we can guarantee for your property.

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