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House price and mortgage rate predictions 2024

Anya Gair
Last Updated 19 June 2024

Much has changed since we shared our mortgage predictions for 2023. Over 2023 inflation soared then fell, as did mortgage rates, the cost of living got tighter and the Help to Buy scheme came to a close. All these changes had an impact on the mortgage market, both within the year and what is happening to mortgages in 2024.

Keep reading to find out what to anticipate in the world of mortgages and house prices this year.

In this guide

Are mortgage rates likely to go down in 2024?

Mortgage rates are likely to keep going down in 2024. Although average rates across two-year and five-year fixed rate deals saw the biggest month-on-month jump since March 2024 in May, rates are still lower than what they were back in January 2024. Plus, some lenders such as HSBC, TSB and Barclays announced reductions to their mortgage products last week. Across the board, the average two-year fixed rate currently stands at 5.91%, while the average five-year fixed rate is 5.48%. If inflation continues to come down, mortgage rates should decline over the coming months as lenders will be anticipating the base rate to be cut.

However, it’s likely we won’t see sub-4 % mortgage deals as standard until the end of 2024 or even longer. So if you’ve been holding off buying your first home or remortgaging until rates reach this level, you might be waiting a while! Instead, consider getting on the ladder or switching deals earlier.

What mortgage rate can I get?

Although looking at average rates can give an indication of which way the market is going, this doesn't help you understand what rate you can get. Your LTV (Loan to Value) and eligibility significantly impact what mortgage rate you will be offered. So although the average two year fixed rate right now is 5.91%, for buyers with a 10% deposit they could access the best two-year rate available from our lender panel at 5.19%.

For prospective buyers, right now could be a good time to buy because there is less demand due to the higher rates. While this means your monthly repayments might be more expensive, or you might have to buy a less expensive property to accommodate the higher rates, it’s less likely you’ll be priced out by other buyers. Some buyers are even managing to bag a bargain, negotiating between 5-10% off purchase prices.

For homeowners looking to remortgage onto a new deal, it’s worth seeing what rate you could get now. If you’re 3-6 months away from your current deal ending, you can lock in a rate now, then if rates drop you can re-apply to benefit from a better deal. The upside of this is if rates go up, you will have already locked in a lower rate. Tembo customers who lock in a rate 6 months before their deal ends through us can ask to re-apply later down the line if rates change through our free rate-checking service. Get started today.

* Based on 90% LTV, with a 35-year mortgage term. Interest rates are accurate as of 20th May 2024.

House prices should increase steadily over 2024

Latest house price data shows that property prices have declined by 0.2% in the year to April 2024. This is unchanged from February, and prices are likely to stay stagnant across the rest of 2024 as higher mortgage rates continue to impact affordability. In fact, the Office For Budget Responsibility has predicted that house prices will fall by 10% between 2023 and 2025. To put that into numbers, this could mean property prices dropping by an average of £50K by the end of 2024. Combined with mortgage rates reducing, this would lead to even more of a buyer’s market.

So if you’ve struggled to get on the ladder in 2023 due to higher rates, you might find it easier to do so this year. Remember to factor in a 5 -10% reduction when negotiating the purchase price. Just keep in mind that if you are only going to be in a property for a few years, the house value could initially fall. For home sellers, this could make moving to a new property harder, as you could have less money from the home sale to use to purchase your next home.

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Energy efficiency will be top of minds

After the soaring energy prices of last winter and the increasing importance of sustainability, it wouldn’t be a surprise if energy efficiency becomes a bigger concern for home buyers. This will be especially true of landlords or those interested in buying a Buy to Let property

New regulations are due to come into effect in 2025 that will need all new tenancies to be for properties with EPC ratings of C or above. The average EPC rating in England and Wales is D, which means there will be a lot of properties which will need improving up in order to be let out to tenants.

However, it’s not just landlords who are concerned about energy efficiency. Almost nine out of 10 prospective buyers view the energy efficiency of a home as an important consideration. While almost half would choose good insulation over a bigger garden. For homeowners looking to sell their home in 2024, it might be worth making improvements to your home before listing the property to ensure it’s as efficient as possible.

This shift will bode well for newer properties, which are typically more energy efficient and sometimes come with additional features like solar panels and in-built electric car charging.

Speaking of new builds…

More new builds coming to the market

There was a drop in construction over 2023 as housebuilders responded to weaker market conditions and opted to finish existing developments rather than opening new sites. But construction should pick up in 2024, helped by anticipated funding for affordable housing projects

The increase in new build properties being built will bolster the market by increasing supply. This is key, as one of the main causes of the unaffordability of housing in the UK is failure to build sufficient homes, in sufficient quantities. 

According to one report by the Centre for Cities, Britain has a backlog of 4.3 million homes that are missing from our housing market. To solve the issue, we would need to increase the size of the UK’s housing stock by 15%. Even if the government were to hit its target of building 300,000 new homes a year, this wouldn’t clear the housing backlog for at least half a century. So the uptick in construction this year is desperately needed, even if it doesn’t completely plug the gap.

Plus, new build developments will also create more shared ownership properties - shared ownership is when you purchase part of a property, then pay rent on the rest, purchasing more of the home over time until you have full ownership. Shared ownership can be more affordable than purchasing a home using a standard mortgage because you are only buying a share of a home. This makes it a great way to get on the ladder sooner, especially for those buying in more expensive areas. 

Renting is getting a shake up

The Renter’s Reform Bill is one of the most significant pieces of legislation for renters and landlords in the past 30 years. The new law is currently under review by Parliament and is likely to come into effect sometime in 2024. 

The private rented sector is a vital part of the UK housing market. Almost 5 million properties in England are privately rented, making up 19% of all households. While some people stay in rented accommodation their entire lives, many see renting as a pitstop until they can buy a place of their own - 62% of private renters in the UK eventually plan to buy a home.

But on average, it takes almost 10 years to save up for a home. So while renting is a vital stopgap for those far off buying, there needs to be a sufficient supply of good-quality let properties. Whether you’re in a property for a couple of months or years, you should expect a property that’s well-maintained. Yet, nearly a quarter of privately rented properties don’t meet “basic decency standards”, while it’s estimated that 14% are actually unsafe. Shockingly, more than half of private renters in England struggle with damp, mould or excessive cold.

The new Renter’s Reform Bill aims to make renting fairer for both tenants and landlords by putting in place a number of changes. This includes tenants needing to give landlords two months' notice when they wish to vacate, allowing landlords more time to find another tenant. 

But there will also be greater protections for tenants, such as changing new tenancies so they no longer start as fixed-term tenancies. Instead of signing up for a year or two, any new tenancy will be a month-by-month rolling tenancy (‘periodic’ tenancy) from the start. This will allow tenants to leave sub-quality properties without being liable for the rent, as well as move to a new place more easily when their circumstances change.

Landlords will also be limited to increasing rent once a year and would need to provide two months’ notice to their tenants instead of the current one. Like now, tenants can challenge the rent increases if they feel it is not in line with the market rate.

One of the main changes of the bill that has got a lot of airtime is the plan to abolish section 21. This is the process that allows landlords to repossess their properties by evicting a tenant. Right now, landlords don’t need to give a reason to give notice - this is why they are referred to as "no-fault evictions". Although the government announced in October 2023 that the abolition of section 21 would only happen when “sufficient progress has been made to improve the courts.", once in effect, this would mean landlords can only evict a tenant under reasonable circumstances.

In the future, there is also talk of extending the Decent Homes Standard to the private rented sector, too. At the moment, it only applies to social housing. Expanding it to include private lets would introduce minimum housing standards that should ensure renters have safe, clean and usable homes.

Let’s make this your year to buy

At Tembo, we specialise in helping buyers and remortgagers boost their affordability, so they can buy sooner or get access to better rates. To see what you could afford, create a free Tembo plan for a personalised mortgage recommendation. You’ll see your maximum buying budget, plus indicative repayments and rates. 

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