The past few years have been turbulent in the housing market. Both house prices and mortgage rates have been affected by different factors, causing the market to look unstable. Currently, there are plenty of houses on the market, both new builds and houses with a bit more history in their bones.
As the market begins to stabilise again, let’s take a look into what has been happening and take a glance into the future to see what the forecast will be for the rest of 2024.
Housing prices
In 2023, the momentum of the housing market rapidly dropped after seeing a boost during the lockdown periods. Houses that were flying off the market suddenly stagnated. During lockdown, houses were snapped up quickly and house prices rose solidly. This was influenced by a changing perspective on the world. Many people wanted their homes to be places they enjoyed, with lots of space to work and relax, as well as having plenty of outdoor space.
2023 saw that momentum slow down with the cost of living crisis rearing its ugly head. As a result of that plus mortgage rates rising, the house prices started to fall again. Some lenders reported an 18% drop in prices.
This year, however, has proven to look a bit more positive. The Nationwide house price index suggested that the average house price in February had risen to £260,420. This is a 0.7% increase on the previous month and 1.2% on the year before, making it the first annual price rise in over a year.
There is cautious optimism for house prices as 2024 continues. Experts expect that the market will experience very slow growth as the year progresses and prices rise. This is likely to be minimal, the opposite of previous years.
Mortgage rates
As of May 2024, the Bank of England has held interest rates at 5.25% which is a record high for 16 years. The aim of keeping interest rates high is to control the inflation boom that is occurring. By discouraging borrowing, people will spend less and therefore demand will reduce, bringing inflation down.
The Bank of England hasn’t ruled out dropping interest rates to be more on target with its 2% goal, however, they have said there isn’t enough evidence to prove that it is the right time to do so now.
Most homeowners have fixed-rate mortgages, so the threat of higher interest rates isn’t as imminent. However, those who are looking to buy a house or remortgage will be. It is expected that 1.6 million deals will expire across 2024, meaning lots of people will be looking to make a new one or tighten their belts again.
Some lenders such as HSBC have started to lower their mortgage deals which could spark a price war across the high street in favour of the customers.
