In the world of mortgages, things have been up and down lately. Housing prices took a dip in September, but lenders are seeing more interest from buyers now. There’s talk of a potential Government scheme to help first-time buyers, which could shake up borrowing and property costs.
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For mortgage rates, it looks like they might drop below 4% in the new year. A recent decrease in UK inflation has put pressure on borrowing costs, hinting that interest rates might go down. Some lenders are already offering fixed-rate deals under 4%, and more cuts could be on the way in early 2024. The Bank of England’s governor, Andrew Bailey, anticipates that the Bank Rate will hold steady at its current 5.25% for a while, signaling no immediate cuts in the ‘foreseeable future’. This implies that mortgage rates may not see significant declines during this period. The general sentiment regarding interest rates indicates a trend of ‘higher for longer’, strongly suggesting that mortgage rates will likely remain stable or hover around current levels for an extended period.
If you’re planning to buy a home while rates are falling, you can keep an eye out for better offers even after you’ve started the process. Some buyers have switched to cheaper mortgage deals while waiting for their purchase to finalize, saving a good amount of money over the long term. Different sources are all pointing towards a potential decrease in house prices across the UK in 2024. Rightmove suggests a national average drop of 1% in new seller asking prices. Similarly, Zoopla, Lloyds Banking Group, and Savills are predicting a decline of around 2-3%. The Office for Budget Responsibility (OBR) is forecasting an even larger decrease at 4.7%. These collective predictions indicate that 2024 might be a good time to consider buying a home in the UK, as prices are expected to be lower.
For those with smaller deposits, there are more options now compared to before. Even 95% loan-to-value (LTV) mortgages have increased in availability and become more competitive. The government’s extension of the mortgage guarantee scheme could keep these low-deposit mortgages coming.
Having a larger deposit still gets you better rates, though. For example, a 10% deposit might get you a lower monthly payment compared to a 5% deposit, even if the difference isn’t massive. But as house prices and mortgage costs remain high, many potential buyers might need to save more before getting a better deal.
As for house prices, the outlook is mixed. While some predict slight falls, any scheme supporting first-time buyers could prevent a significant crash. Housing market trends might vary by location and the type of property. Smaller homes might see more competition, while bigger, pricier properties could struggle to sell.
The economy will play a big role in house prices. If the economy weakens and unemployment rises, prices might fall. On the flip side, areas with business growth might see prices go up. Currently, high house prices and interest rates are making it tough for first-time buyers, but upcoming policies might bring some relief.
In simpler words: Mortgage rates might drop below 4%, and there could be more options for people with smaller deposits. House prices might not change drastically, especially if a scheme for first-time buyers kicks in. The economy will decide a lot about what happens next in the housing market. Different regions in the housing market operate as distinct local markets, each with its own supply-demand dynamics. The expected decrease in new seller asking prices will have varying impacts across different areas of Great Britain. In regions with fewer homes available for sale, there’s a possibility that new seller asking prices might stay the same or even show a slight increase compared to this year.