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%.

The increase is a 180-degree turnaround from their previous expectation of a 4.0% decline in UK house prices for 2024.

Inflation has responded favorably during the end of last year to the rate hikes made by the MPC, and with this, the lending market became competitive on its own, despite the rate being held steady in the last three meetings of last year in September, November, and December.

Rightmove, the online property listing website, reported sellers have increased their asking prices by an average of 1.3% which amounted to an average increase of £4,571 between December and January. 

Overall, the year is starting out 0.7% lower than a year ago, but with housing market supply growing by 15% more available properties and demand growing as well due to lenders offering more attractive deals, with some below the base rate of the Bank, the optimism seems to be well placed.

In another positive sign, Knight Frank reports there were 20% more sales at the start of January in comparison to the same time last year. 

The same optimistic outlook could be shaping up for others that reported expected house price declines for 2024. 

The good news for the housing market is also good news for homeowners. There is now hope for those worried about falling into negative equity. 

Because of the advantages available now with lower interest rates, homeowners are encouraged to shop online for a remortgage. Doing so could help those coming to the end of their fixed rate mortgage term this year. While the near historically low interest rates of 2022 are gone, current rates are more affordable than could have been expected. 

Savings could be found for those that have had their term end and have been transitioned to their lender’s standard variable rate (SVR) because a lower interest rate, a more affordable rate, could be found with a remortgage. The SVR could be double or more and therefore more expensive than rates offered with a new deal.

The forecast of a growing housing market for this year is definitely a change in expectations and it offers a safety net to homeowners. It also offers hope for a very different economy for all consumers this year. If inflation continues to drop, it will soon trickle down to household budgets. If homeowners can avoid negative equity, it puts remortgages in reach of those that would lose out on the opportunity to secure an affordable interest rate versus going into arrears. 

More housing market reports will be coming out in the days ahead. There is a possibility that reports will continue to forecast growth for the housing market this year, and perhaps more so than they would be expected. The housing market shows resilience time and again because hopeful home buyers will take what opportunities they can find in the hard times and take advantage of unique creative ways to get on the property ladder such as first-time buyers choosing affordable DIY fixer uppers with lower purchasing costs. 

The current surprisingly low interest rates in mortgages are helping bring home buyers back to the market, and they are helping homeowners secure rates that are less impactful than they would have faced for there are deals below the current rate set by the MPC. 

Could those rates be pulled as lending becomes less competitive? Could the current lower than base rate deals disappear if inflation stalls rather than declines? Could the disappearance of the competitive rates trigger an exit of buyers in the housing market? 

Many experts believe a lot of what will develop, or will not, could be triggered by the first MPC meeting of 2024 scheduled for 1 February.