RESIDENTIAL Opinion
What’s in store for the UK mortgage market in Q2?
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rom volatile mortgage rates and an uncertain political landscape to stubbornly high inflation and the ongoing costof-living crisis, it’s safe to say that the UK property market has had its fair share of challenges to contend with over the past year. This was recent exemplified by statistics from Zoopla showing that the national average house price has now fallen to £264,100 – £2,100 less than it was 12 months ago. On the surface, this might make for quite a gloomy forecast, but the fact of the ma er is that the rate at which house prices are falling is actually slowing. On top of this, mortgage rates have already started to decrease steadily since the beginning of 2024, with several big lenders having dropped rates for the first time in months. Despite the challenges that the property market continues to face, these recent indicators certainly give reason for optimism. That said, the question remains: how will the mortgage sector fair over the next quarter, and what should homebuyers and property investors alike be considering when making their next move up – or down – the ladder?
Slowing market, lower rates I don’t have a crystal ball, so I – like anyone else – can’t say with complete certainty what’s in store for the property market over the coming quarter. However, it’s my personal opinion that the market is highly competitive, due to there being considerably less property business being transacted. This means that lenders are really having to fight for their share of the market, which has
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The Intermediary | February 2024
in turn prompted the drop in interest rates that we’ve seen from some. In response to this, we’re now seeing a significant number of property owners choosing to improve and develop their existing homes rather than moving. It’s easy to understand why – a er all, with most homeowners having secured a lower rate when purchasing their current property, it stands to reason that they would prefer to avoid the unnecessary increase in their mortgage repayments that buying a new home would likely bring. It’s probable that this inertia will cause interest rates to remain stable throughout the course of this year, before we begin to see a steady decrease in 2025 and 2026. That, at least, is my hope.
Regional differences While it’s true to say that the UK property sector has experienced something of a dip over the past 12 months, this is not necessarily a statement that can be applied to all corners of the country. Indeed, it’s clear that some regions are far outperforming others. For example, the latest data from Zoopla has put an emphasis on a clear divide between the North and South. While major cities in the North like Manchester (+0.4%), Leeds (+0.6%), Liverpool (+0.9%) and Edinburgh (1.3%) have all seen increases in average property prices, many urban centres further south – such as No ingham (-0.6%), Oxford (-0.6%), and Leicester (-1.8%) have experienced decreases. In those areas where there’s been a rise in prices, houses have been practically flying off the shelves, where in others they’ve been taking much longer to sell. Looking at the country as a whole, however, the majority of people need
GARY DAS is founder and CEO of Active Mortgages
to accept that they are going to be paying more for property, with even a drop in value marginal at 1% to 3%, and that the mortgage interest rate correction has been long overdue.
The right time to move? Ultimately, mortgage rates are coming down, albeit slowly. However, for those holding off for the ‘right time’ to move – such as when rates dropped to the all-time low of around 1% in 2020 – the unfortunate truth is that we are unlikely to see this for the foreseeable future. As such, it’s important to consider that any move will likely come with interest rates of between 3.5% and 4.5%. For the self-employed individual or business owner, the right time to move does take more planning. I always advise clients to think one step ahead if intending to move within the next 12 to 24 months, and reverse engineer for deposit, profit, salary, expenses, turnover, and business structures to ensure they are in the strongest possible position for lenders.
Reasons to be cheerful While there are certainly some reasons to be cheerful about the outlook for the UK mortgage market, it’s clear that there is still uncertainty around rates. With business in the property sector having slowed, especially in certain regions of the South, many homeowners in these areas are likely to stay put for a li le longer before taking the plunge to move. That said, the situation simply can’t stay as it is, and the market will inevitably pick up in due course – even if it's later than many would like. ●