The Future of Mortgages: Trends to Watch in 2024 and Beyond
As we move through 2024, the UK mortgage market is experiencing notable shifts and trends that could impact both prospective homebuyers and current homeowners. Here’s a look at some key trends to watch and how they might affect your mortgage decisions.
1. Falling Mortgage Rates
After a period of high interest rates, there are signs that mortgage rates are beginning to fall. For instance, the average rate for a two-year fixed mortgage has dropped from a peak of 6.35% in August 2023 to 5.03% in January 2024 (CBRE UK). Some major lenders, such as Halifax and Leeds Building Society, have even started offering rates below 4% for certain products (Knight Frank). This trend is expected to continue as inflation decreases and the Bank of England potentially reduces the base rate later in the year (Zoopla) (Knight Frank).
2. Increased Affordability
The combination of falling mortgage rates and modest wage growth is expected to improve housing affordability. While house prices have remained relatively stable, slower price growth and potential pre-election economic measures could further support buyers (Zoopla) (Knight Frank). If the Bank of England’s inflation target of 2% is met by early 2025, this could create a more favourable environment for homebuyers (Zoopla).
3. Stabilisation of House Prices
House prices in the UK are expected to stabilise with modest growth. Following a year where many predicted significant declines, house prices have shown resilience due to various factors, including lender support and low unemployment (Zoopla). The expectation is for house prices to remain stable or grow at a low single-digit rate, making homeownership more accessible over the next couple of years (Knight Frank).
4. Changing Buyer Demographics
In 2024, cash buyers and first-time buyers are set to be the most active groups in the housing market. Rising rents are pushing more people towards homeownership, and first-time buyers are benefiting from government incentives and potentially smaller deposit requirements (Zoopla) (Knight Frank). Upsizers, however, may face challenges due to higher mortgage rates, particularly for larger properties requiring bigger loans (Zoopla).
5. Increased Use of Product Transfers
Due to affordability pressures, many existing mortgage holders are opting for product transfers with their current lenders rather than remortgaging with new lenders. This trend is expected to continue in 2024, as it allows borrowers to bypass stringent affordability tests while securing new mortgage deals (UK Finance).
6. Regulatory and Tax Changes
The mortgage market is also influenced by ongoing regulatory and tax changes. For instance, buy-to-let lending has been significantly impacted by regulatory and tax adjustments, leading to a sharp contraction in this market segment. This trend is likely to persist, affecting smaller landlords who find it harder to absorb additional costs (UK Finance).
Conclusion
The UK mortgage market in 2024 is poised for several significant changes, with falling interest rates, improved affordability, and stable house prices creating a more favourable environment for homebuyers. At Rose Blythe Mortgage Solutions, we stay abreast of these trends to provide our clients with the best advice and mortgage solutions. Whether you are a first-time buyer, looking to remortgage, or considering an investment property, our team is here to help you navigate the evolving mortgage landscape.