Mortgages: improved outlook in 2024
By Mike Boles, Head of SPF Private Office
Goodbye 2023, hello 2024! After a rollercoaster year for the housing market, are we over the worst of it? Here experts from across the housing industry look into their crystal balls to find out what could lie ahead for buyers and sellers this year.
First of all: house prices. National forecasts for 2024 naturally vary. To give you a taster, Rightmove expects average asking prices for newly-marketed homes to drop 1% this year, as competition between sellers heats up. While Zoopla, another property portal, anticipates house prices to be down 2%, assuming mortgage rates fall to 4.5% by the end of the year.
Meanwhile, Nationwide says house prices are likely to record a “low single digit decline or remain broadly flat”. And Halifax predicts a decrease of between 2% and 4%, adding that forecast uncertainty is high given the economic environment.
“The better than anticipated activity last year has shown that many buyers are still getting on with satisfying their housing needs,” says Tim Bannister, Rightmove’s property expert. “There is considerable opportunity for sellers and their agents to attract these buyers with the right pricing and marketing strategy. This underlying level of good demand at the right price makes it unlikely that we will see a more significant drop in prices.”
It’s worth bearing in mind that local housing markets don’t necessarily match the national picture. Each one has its own particular dynamics, so if you’re thinking of selling, seek advice from your local estate agent on how to price your home appropriately for your area.
Kate Eales, Deputy Head of Residential Agency at Strutt & Parker advises sellers not to rest on their laurels. “Responding to both your agent’s feedback and market sentiment, plus acting swiftly, is vital,” she explains. “We are certainly seeing an uptick in activity as we start the year, but this doesn’t mean you should sit back. Once you’ve made the decision to move, you have to be ready to adapt your approach in order to get the offer you want to help you buy your next home.”
After a bumpy 12 months or so when it comes to interest rates and mortgages, there seems to be light at the end of the tunnel as we start the year with mortgage lenders beginning to cut rates.
Mike Boles, executive director of SPF Private Office, says: “The markets are pricing in quicker-than-expected rate reductions, and we expect the base rate to be heading towards 4% by the end of 2024.” This outlook is echoed by BNP Paribas whose latest forecast predicts the base rate will fall to 4.25% by the end of 2024. After seeing repetitive rate hikes in 2023, the question now is: when will they start falling? “The Bank of England has hinted that rates won’t be tumbling as fast as they rose” adds Mike, “and in order to drop towards 4% by the end of the year, this would necessitate around three or four interest rate cuts in the next 12 months.”
There’s little doubt that borrowers have to get used to a higher rate environment. Many borrowers are due to come off fixed rates this year. And while pricing is moving in the right direction, they will still be in for a payment shock, warns Mike.
The good news is that improved lending criteria and reduced pricing on new fixed-rate mortgages is underway. “As well as reducing rates, lenders have been improving criteria with better loan-to-incomes and better terms for self-employed applicants,” Mike explains. “The new year brings new targets and lenders who didn’t have a vintage 2023 will be looking to rectify that situation this year, bringing further improvements in rates and criteria.”
Read a more detailed outlook on mortgages here.
The outlook for housing market activity has got brighter, fuelled by a ‘modest easing’ in mortgage rates, according to the Royal Institution of Chartered Surveyors’s (RICS). RICS’s November sentiment survey of members suggests that although buyer demand is still falling, it is the least negative figure since April 2022.
Our own data for November shows an unseasonable uptick in buyer appetite in many regions, which bodes well for homeowners looking to sell this year and signals a change in sentiment. The number of applicants in southwest England grew by 18% against October. In Scotland, they increased by 17% month-on-month – and soared by 88% year-on-year. And in prime central London, new buyer numbers in November were up 16%, offers made up 44%, in comparison to the same month in the previous year.
RICS’s November sentiment survey also reveals a more optimistic view on housing sales going forward. Surveyors’ sales outlook for the three months ahead improved with the first positive reading since early 2022, while their expectations for the year ahead were the most upbeat since January 2022.
“The survey provides further evidence that sentiment is a little less negative than previously was the case with, critically, the new buyers enquiries indicator finally beginning to stabilise. This is being aided by increased confidence that the interest rate cycle has peaked which is reflected in somewhat more competitive mortgage products coming to the market,” says RICS chief economist, Simon Rubinsohn. “However, with the cost of money likely to remain elevated for some time to come and the economic outlook still downbeat, it is not surprising that the overall tone to the anecdotal remarks from survey respondents is still quite cautious.”
Buyers with smaller deposits can continue to take advantage of the mortgage guarantee scheme after Chancellor Jeremy Hunt extended it in the Autumn Statement by 18 months until the end of June 2025. The scheme, designed to increase the availability of 95% loan-to-value mortgages, was due to close for new accounts at the end of 2023.
Buyers and renters could benefit from more new homes after Hunt also unveiled plans in the Autumn Statement to boost supply. You can read more about what was in the Autumn Statement in our update here.
It’s also worth keeping an eye on two high profile pieces of proposed legislation highlighted in the King’s Speech.
The long-awaited Renters (Reform) Bill was unveiled last May (2023) as a ‘once-in-a-generation overhaul of housing laws’ to deliver a ‘fairer’ private sector for both landlords and tenants. Meanwhile, the Leasehold and Freehold Reform Bill aims to make it cheaper and easier for more leaseholders to extend their lease, purchase their freehold and take over the management of their building.
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