Good news for housing and mortgages

After prospective and existing mortgage borrowers had a tough year in 2023, there looks to be good news on the horizon.

In 2023, the cost-of-living crisis squeezed household budgets. Higher interest rates put pressure on those looking to take on mortgages for the first time, remortgage, or switch deals. According to UK Finance, more customers were in arrears on their mortgage payments than in 2022 (up by 30%) due to extra pressure on their finances, although it should be noted that the total number in arrears represents only around 1% of total outstanding mortgages in the UK.

Renewed activity in the housing market

According to Zoopla’s December House Price Index, there was a 25% rise in the stock of homes for sale. This was 4% higher than during the same period in 2019. Buyer sentiment saw improvement, with demand was also up by 19%.

The Index also recorded a 1.1% decline in average house prices in November 2023 encouraging more buyers to the market. There was no substantial drop in house prices, despite the increase in mortgage rates, because of several factors: wages continued to grow, the labour market was strong, and lenders tried to help borrowers as much as they could with the Mortgage Charter, all of which helped to prevent forced sales and a subsequent landslide in property values.

New buyers and those looking to remortgage may still find affordability a struggle in 2024 – however, Zoopla predicts that first-time buyers will be the largest group of buyers in 2024 and into 2025, with rising rent prices being a key motivation.

Mortgage price war

The mortgage price war intensified in January, with many lenders reducing rates, as the race to attract new borrowers gathered speed. This will come as a much-needed reprieve for 1.6 million homeowners who remortgage this year. According to Moneyfacts, on 24 January 2024, the average rate on a two-year deal was 5.58%, down from a peak of 6.86% last July. Five-year deals also fell to 5.2%, down from a high of 6.37% in the same period.

More rate reductions are expected, but as ever the market remains uncertain, particularly until Bank Rate reduces.

Looking further afield

In the face of higher borrowing costs and the search for value, one of the key trends for 2024 is likely to be that buyers continue to look further afield in search of better value. Currently, the average distance buyers are looking to move when searching on Zoopla is only 4.3 miles.

Here for you

We're prepared for any market changes in 2024 and will be here to support you through all your property decisions.

Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.