UK Mortgage Market Update: Rate Cuts, Rising Prices, And Borrower Opportunities 9th December 2024

Bank Of England’s Upcoming Decisions Spark Market Anticipation

Big decisions are on the horizon as the Bank of England (BoE) prepares for its next monetary policy meetings on 19 December 2024 and 6 February 2025. While December’s meeting is expected to hold the base rate steady at 4.75%, all eyes are on February 2025 when a potential 0.25% rate cut could become a reality, pending economic conditions. With UK inflation easing to 2.3% in October 2024—its lowest in over two years—there are promising signs of stability. Borrowers, homeowners, and market watchers alike are eagerly awaiting what could be a pivotal moment for the UK economy.

Mortgage Rates Plunge As Major Lenders Slash Costs

The UK mortgage market is buzzing as several leading lenders have introduced significant rate reductions. These cuts signal increased competition and a window of opportunity for both new borrowers and those seeking to remortgage.

• NatWest: Up to 0.39% reduction on two- and five-year fixed-rate deals, a move welcomed by homeowners.

• Coventry Building Society: Residential mortgage rates dropped by as much as 0.26%.

The trend didn’t stop there. From 10 December 2024:

• Barclays: Five-year fixed residential rates lowered by up to 0.14%, offering some of the most competitive deals in recent months.

• TSB: Introduced a reduction of up to 0.22% on three-year fixed rates for first-time buyers and homemovers, providing much-needed affordability in a challenging market.

House Prices Defy Expectations With November Growth

The Halifax House Price Index revealed a surprising twist in November 2024, with UK house prices climbing by 1.3%. This marks the fastest annual growth in two years and pushes the average property price to £298,083. For sellers, this is welcome news, while buyers may feel the pressure to act before prices climb further.

Affordability Challenges Continue To Dominate Headlines

Despite encouraging market trends, affordability remains a major hurdle for many aspiring homeowners.

• The average house price in England is now 8.6 times the annual household income, highlighting the steep financial challenges facing buyers.

• London continues to be the least affordable region, with prices far outpacing income levels.

This disparity underscores the importance of expert mortgage advice, such as that provided by Mortgage One, to navigate the complexities of the market.

Berkeley Group’s Optimism Signals Market Recovery

Even amid a reported 7.7% drop in half-year profits, property developer Berkeley Group is demonstrating renewed confidence in the market. The company has resumed land acquisitions, buoyed by government policies and improved economic conditions. This move signals a belief in the long-term stability and growth of the UK housing sector.

London’s Stagnant Market Faces Unique Challenges

London’s property market, long considered a gold standard for investment, has been underperforming. Over the past decade, house prices in the capital have risen by just 13%, equating to a real-terms decline of 16% when adjusted for inflation. High interest rates and tighter regulations have taken their toll, leaving London lagging behind other regions.

Halifax Introduces Short-Term Fixed-Rate Mortgage Option

Halifax has launched a unique 18-month fixed-rate mortgage designed for borrowers seeking flexibility amid changing rates. Starting at 4.37% for those with a 40% deposit, this product offers a smart solution for homeowners looking to adapt to an evolving financial landscape.

Rising Costs Highlight Borrower Challenges

The Bank of England’s latest Financial Stability Report provides a sobering view of future challenges for borrowers:

• An estimated 4.4 million mortgage holders are expected to face higher repayments over the next three years.

• Of these, around 420,000 households may see their monthly payments rise by more than £500—a sharp increase that underscores the importance of proactive financial planning.

Encouraging Signs In Mortgage Approvals

Amid the challenges, there’s a silver lining. Net mortgage approvals surged to 68,300 in October 2024, the highest level since August 2022. This indicates easing pressures on borrowers and growing confidence in the housing market. As lenders compete and rates fall, opportunities are emerging for buyers to secure favourable deals.

Experts Predict Prolonged High Mortgage Rates

Despite recent rate cuts, industry analysts caution that UK mortgage rates could remain elevated for up to five years. This long-term trend will continue to test first-time buyers and those looking to refinance, making expert advice essential for navigating the complexities of the market. Speak to Mortgage One today.