UK house prices have slowed according to the recent release of data by Nationwide. Annual growth for the month of October was 2.4%, down from the two year high reported in September of 3.2%. This was unexpected as little changed from the prior month in mortgage rates and there remained the forecast for another rate cut by the end of the year. Worry about the housing market is misplaced as there is a strong boost to the housing market expected in the new year as the stamp duty changes motivate home buyers to take advantage of savings and buy.

The forecast had been for growth of 2.8%, and though it was lower, it was still the third highest rate of annual growth since December 2022.

The average house price in the UK grew to £265,738 in October, which is an increase of 0.1% from September. 

Along with the changes in the stamp duty, which is a motivator to buyers looking to save money, the expectation of the Bank of England’s Monetary Policy Committee (MPC) lowering the standard base interest rate before the end of the year brings both confidence in the economy and possibly more savings with lower mortgage rates.

The first base rate cut in 2024 was voted for by the MPC in August. It was the first reduction since March 2020 when the rate was cut to almost zero at 0.1% during the global pandemic. Once the rate began to grow, the MPC raised the rate during every consecutive meeting from December 2021 to August 2023 when the rate reached a peak of 5.25%. This rate remained steady until August this year when the sixteen-year high base rate was cut by 0.25% to 5.0%.

The next rate cut, which is expected for this month due to inflation falling from 2.2% to below target at 1.7%, will likely be another 0.25% taking the base rate to 4.75%. The next MPC meeting is Thursday, 7 November. 

If the rate is cut, lenders may respond with new mortgage and remortgage products, but that could also occur if the rate is not cut. Lenders began cutting their lending rates weeks before the MPC voted to reduce the base rate in August. By the time the MPC voted to cut the rate, there were already deals on the market below the base rate. The same competitive situation as before has happened prior to the upcoming meeting, making it pretty much unnecessary to wait on the decision of the MPC.

As far as home buyers are concerned, buying before 31 March will save some new homeowners money. In September 2022, the zero rate at which the stamp duty kicks in or the nil rate was raised to save home buyers money. For first time home buyers, the rate at which they had to pay stamp duty was raised from £300,000 to £450,000, and for home buyers purchasing an additional home, the nil rate was raised from £125,000 to £250,000.

For those planning to purchase, by doing so before the stamp duty nil rate lowers, they could save money, and that opportunity could bring higher demand to the housing market. The months following could then reveal a correction that will appear the housing market is losing momentum, but it will be settling back into a closer to normal demand after the boost. However, it will be nearing the usual spring season boost as the weather warms and people are looking to make changes and bring new things into their life including a new home. 

The housing market is expected to continue on a path of growth but nothing that would be record breaking as happened when interest rates were historically low during the pandemic. The expectation of the base rate lowering to under 4% but rising again in 2025 to near 5% will likely bring about home buyers seeking long term fixed rate deals to lock in their chosen interest rate against any increases. 

This will also motivate homeowners to do the same in seeking the best remortgage rate and locking in a fixed rate to save money and offer relief from the stress of worrying about rising rates. 

There will be another MPC meeting in December but not in January, making the wait for any change to the base rate until February if the MPC closes out 2024 with only one rate cut this year. 

Despite strong expectations of a majority vote by the MPC to lower the rate this month or the next, those expectations have been shattered many times this year. It was at the start of the year that expectations grew month after month for a spring cut, then early summer, but it took until August.

If borrowers could benefit from a mortgage or remortgage now, then taking advantage of the current optimistic competitive deals is encouraged. Waiting might get a borrower more products to choose from, but not necessarily rates much lower than available now. This could bring comfort to those hoping for a rate cut next week should that not happen and offer peace of mind if it does and rates simply look a lot like they do now.