The latest data from Nationwide reveals another positive month for the UK housing market. The average house price increase was the strongest growth in a year. The Nationwide housing index reported a 0.7% increase in January over the previous month’s reported 1.8% decrease for December. The average house price rose to £257,656, and while there was a month-to-month increase, there was a 0.2% decline from January 2023. 

The Bank of England’s Monetary Policy Committee (MPC) will meet for the first time in 2024 on Thursday. The 1 February meeting will be watched closely by experts, lenders, and borrowers with most expecting a majority vote to hold the rate steady. It would mark the fourth consecutive meeting for the rate to stay at 5.25%. The minutes will reveal how many of the committee made up the majority of the vote. A few distractors from holding the rate steady will likely be a vote for a hike versus a cut to the current rate.

The lending market is acting quickly with their new product offers, and they are not responding to the actions of the Bank of England’s Monetary Policy Committee (MPC). The standard base interest rate of 5.25% has remained steady since last year when votes in September, November, and December, the final MPC meetings of the year, resulted in a majority of votes to hold the current rate. Yet, interest rate offers from lenders on mortgages and remortgages have been getting lower and lower over the past few weeks with some lower than the base rate and reaching below 5.0%. The reason for the optimism in lending has been two-fold, one being the quick and steep decline of inflation in the final quarter of 2023, and the lack of demand from borrowers due to the higher cost of borrowing.

The housing market has proved to be resilient once more, and lenders are being credited with the turnaround from the gloom and doom predictions for 2024. As last year was nearing a close, all signs pointed to a difficult year ahead. Home buyers were exiting the housing market. Some were leaving due to a lack of confidence in the economy, others due to the higher cost of borrowing, and others simply because they could not afford to buy. Despite the Bank of England holding steady on the standard base interest rate, the lack of borrowing spurred lenders to make their own cuts to increase demand.

With lenders offering interest rates lower than the Bank of England’s standard base interest rate, homeowners and home buyers are taking notice and advantage of the opportunity to save money. They certainly should, because the lower rates are due to lenders being in a competitive environment versus basing their rate choices on the decisions of the Bank’s Monetary Policy Committee (MPC). Through most of 2023, the MPC was increasing the base rate. Votes to hold it steady did not occur until the final three MPC meetings of the year. There certainly was not a vote to cut rates, so lenders took the initiative to do so without direction of the MPC.

There have been optimistic forecasts for the 2024 UK housing market, which will be something to hold onto in reviewing the latest report from the Office for National Statistics (ONS). The official data revealed a decline in house prices in November. It was the fastest fall in the average house price in more than a decade. London experienced the largest decline with an annual 6.0% fall, but the capital’s average house price remained the highest at £505,000.