It is probably fair to say that many brokers and mortgage advisers have been counting down the days until 2023 was officially in the rear-view mirror.
The past year has been challenging. For the first eight months of 2023, the Bank of England persisted with its inflation-combatting rate hiking cycle, pushing the base rate up by 1.75 percentage points to reach a 15-year high of 5.25 per cent in August.
As a result, those without fixed-rate mortgages have experienced a substantial increase in their monthly repayments, and significant numbers of potential buyers likely had to reassess their plans in light of the heightened cost of borrowing.
Brokers have had a hugely important role to play in helping people remortgage or understand the amount they can borrow for a prospective purchase.
As the cost of borrowing has increased further this year, house prices have softened slightly, with the new higher-rate environment dampening demand and impacting buying power.
Despite these challenges, however, a cautious sense of optimism has creeped into the market in the past few months that should continue to build as we enter the new year.
So, as brokers and mortgage advisers turn their attention to the year ahead, now is an opportune moment to consider what the property market could have in store for them in 2024.
Interest rate stability
The obvious place to start is interest rates.
With the base rate held at 5.25 per cent at the past three of the monetary policy committee’s meetings since September 2023, we have witnessed a period of relative stability at the end of the year.
What's more, after 14 consecutive hikes between December 2021 and August 2023, and inflation falling to 3.9 per cent in November (though rising again to 4 per cent in December), signs suggest that the base rate might have near peaked.
To the relief of intermediaries and property buyers alike, this stability has had two notable benefits.
Firstly, it has allowed people to adapt to the new higher interest rates, aligning their budgets and financial plans accordingly.
Secondly, the belief that the base rate has now peaked has, in turn, led to a loosening of the mortgage market, with falling rates facilitating a noticeable return of confidence among buyers and investors in the property market.
Evidence of this can be found in the most recent house price indices.
Despite expectations of a 0.4 percentage point decline in the month to November, for example, prices actually rose by 0.2 percentage points.
Meanwhile, data from Zoopla showed that buyer demand immediately started to pick up following the first rate pause from the BoE, rising by 12 per cent as the mortgage market stabilised.
With economists now forecasting that the base rate will fall in the next year as economic stagnation creeps into the BoE’s decision-making, this trend should continue in 2024.
In turn, if this were to materialise – and it remains a big ‘if’ at present, with the threat of inflation ever-present – one would expect there to be a positive impact on prices and transactional activity in the UK property market.
