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What is the Current State of the UK Housing Market?

MORTGAGES | 30.07.2024

Since the pandemic, house prices have soared and in October 2022, the average two-year fixed rate hit 6% for the first time in just over a decade. The Bank of England has continually increased interest rates to try to tackle inflation, however, this huge increase made borrowing more expensive, and many people are finding they are refused mortgage approvals. This can understandably create a tainted view of the current UK housing market, but there are signs, including reaching the Bank of England’s targeted 2% inflation, that we could be seeing more stability within the market.  

What has Happened to the UK Housing Market?

High interest rates have increased the cost of borrowing, increasing mortgage costs, ultimately meaning that buyers are finding they can no longer afford properties that were once within their financial reach. Earlier this year, we did start to see a growth in UK house prices, despite a rise in mortgage rates. Nationwide has said that house prices increased by 0.4% between April and May, following 2 consecutive months of decline, taking the annual rate of growth to 1.3%.  

How Has This Affected House Sales in the UK?

There has been a huge shrink in demand for borrowing in recent years, due to the increased expense, and with this, sellers are being forced to drop the asking price of their homes to make them more affordable for buyers. In recent months, however, it’s been reported the market is starting to show signs of resilience with a growth in consumer wages and households depositing a record £11.7bn into tax-free ISAs before the annual deadline. This increase in savings is a sign that consumers will soon be ready to spend more.  

What’s in Store for Interest Rates for the Rest of 2024?

The market currently expects a late summer or early autumn rate cut, whilst keeping an eye on disinflationary factors such as unemployment growth and stalling economic growth. There are many concerns about the risk of slowing down the economy whilst keeping the base rate at 5.25%. A drop in interest rates should mean a drop in mortgage rates but it’s important to keep in mind that the housing market is volatile. At present the average 2-year fix is 5.97% and for a 5-year, it’s 5.53%, which is quite a jump from the 2% of the majority of current fixed-term deals.  

Will House Prices Rise or Fall?

Central bank has reported around 61,000 net mortgage approvals for house prices back in April, with net mortgage lending rising from £0.5bn in March of this year to £2.4bn in April also. Even though the figures are showing improvement, Andrew Wishart, analyst at consultancy Capital Economics, said: “The big picture remained one of a stagnant market that was unlikely to regain momentum until the Bank of England starts reducing interest rates.” He also added that “House prices could slip modestly over the next few months, given signs that more homes were coming up for sale and mortgage rates were still high.”  

Is the Housing Market Showing Signs of Resilience?

Even though numbers are not increasing as thought, the housing market is definitely showing signs of resilience and even though higher mortgage rates at present have slowed down the housing market, it is not derailed and there is every hope that we will start to see number improve in terms of interest rates, mortgages deals, and house prices.  

Your Reliable Mortgage Broker in Manchester, Taylormade.

Here at Taylormade, we feel it is our job to offer as much certainty, support, and advice as possible throughout uncertain times, to ensure that those coming to the end of their fixed-term deals can proceed with steady footing. We are the leading mortgage advisor in Manchester, operating throughout the UK, and we offer independent, friendly, and helpful advice to steer you in the right direction. Contact us today, your trusted mortgage broker in Manchester.
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