While there are experts forecasting a drop in house prices, which has been a concern for homeowners fearing a loss of property values and a slip into negative equity, a new report has called for a 3.0% increase. Estate agent Knight Frank has a different outlook for the UK housing market. The optimistic forecast for a 3.0% increase in house prices for the coming year is due to an expectation that the Bank of England’s Monetary Policy Committee (MPC) will cut the standard base rate from its current fifteen year high of 5.25%.

Homeowner household budgets are being strained. Inflation, the higher cost of energy during winter, and higher interest rates are taking a toll. Over a million homeowners with fixed rate mortgages will come to the end of their deal this year and the change in their expenses could be shocking. They will no longer have their locked in interest rate, and for many that rate was obtained when the Bank of England’s standard base rate was near the all-time historic low. It remained at 0.1% through 2021, until the Monetary Policy Committee (MPC) voted in December 2021 to hike the rate to 0.25%. It remained at 0.25% until the February 2022 MPC meeting when the rate doubled to 0.50%.

It is certainly no surprise that remortgage demand has increased. Lenders have been competitive and are offering attractive deals. Some of the deals are unexpected as they are below the standard base rate of the Bank of England. The deals are so good considering what they could be, and they might possibly disappear as quickly as they came onto the lending market. This is why experts are encouraging all homeowners to shop for a remortgage and discover what saving they might find.

UK house prices have been forecasted to decline in the year ahead. However, the average UK house price for December increased for the third consecutive month according to Halifax. The increase has not deterred their expectation of a fall in 2024 of up to 4%. Buyers are not returning to the market as the data would suggest, but rather there are fewer properties in which to purchase. Supply has dipped further, and it has pushed the typical home purchase to £287,105. 

The current rate of the Bank of England is 5.25%. It is the highest rate in fifteen years, and for those borrowing a large amount, the interest rate matters to the point of pushing something beyond affordability such as in buying a home. Homeowners remortgaging at the end of their mortgage term could face sliding into arrears due to higher interest rates. This is why when lenders begin to lower their offerings below the Bank’s rate borrowers should take notice.

The opportunities that are available for hopeful home buyers are fewer than would have been found only a few years ago. According to a recent report from Nationwide, the deposit paid by a typical first-time home buyer would be 105% of the buyer’s average gross yearly income. In addition, the mortgage repayment would take approximately 38% of monthly take home pay. The cost of becoming a homeowner has grown exponentially and there are several factors that have made it so.