What is in store for the UK housing market is a concern for some experts, as there are factors at play that could stall growth and in doing so could stall the economy. The housing market and its constant ebb and flow through the ups and downs are an important part of our economy no matter whether one is a homeowner or not. There are those that next year will be considering a purchase of a new home for the first time, those considering a larger home for their growing family or the combining of generations into one property, while there will be others downsizing as their family matures into their own family units. No matter where the home buyer is in the market, the flow of buying and selling is important to keep it going, and it is when there are fewer buyers that there are stalls to the needed growth. Unfortunately, there are many buyers that could be shut out of the market next year.

Interest rates, while having declined even more than expected for the year, still leave it difficult for home buyers to climb onto the property ladder due to pricing. House prices surged during the pandemic as there was a rush to find property in which one had more space both indoors and out to better endure the lockdowns, working and studying from home, and being home more often.

The elevated house pricing has remained and were boosted yet again when the interest rates began to rise as inflation set in to rise to double digits.

The Bank of England’s Monetary Policy Committee (MPC) raised the standard base interest rate to a peak of 5.25% in August 2023 having voted for a base rate increase during each meeting from December 2021. The peak rested at the sixteen year high until August of this year. The MPC voted for a slight decrease of 0.25%, then another 0.25% reduction occurred during the November meeting, taking the base rate to its current standing at 4.75%.

Fortunately for borrowers, lenders have been operating within a competitive lending environment and rates have lowered below the base rate. The best rates are available for home buyers with some mortgages below 4.0%, and remortgage rates for homeowners are not far behind.

Lower interest rates do help borrowers, including home buyers. However, with rising house prices it is more difficult. There is also the issue of inflation taking more out of the pockets of households, making it harder to save for a deposit. Another barrier to deposit savings is rising rental costs. 

In an effort to help home buyers, a discount on the stamp duty was offered two years ago. The zero rate, the level at which a purchase would require payment of a stamp duty was raised. This offered relief to some, and it is coming to an end early next year. As of the end of March, the stamp duty will revert back to what it was before the discount was put into place in September 2022. 

The stamp duty change is expected to hit first-time buyers the hardest. It will impact all home buyers, but could be what closes some first time buyers out of the market due to affordability. 

The lack of first-time buyers could stall growth in the housing market. A stall in growth could impact property values which in turn might rob homeowners of access to the best remortgage rates.

Property values either help or hurt a homeowner’s loan to value or LTV ratio. The lower, the less risk of borrowing and therefore lenders reward with better borrowing rates. It is with growing house prices and growing property values that a homeowner could strengthen their LTV and gain access to the best deals when remortgaging.

It is expected that home buyers will be rushing to purchase before the stamp duty discount disappears on 1 April 2025. So will homeowners seek remortgages during this time to take advantage of better LTV ratios and attractive lending rates.

After April, a slower housing market could emerge and impact the economy as well as homeowner’s efforts to remortgage at very best and lowest interest rates possible for the greater savings. This is why some homeowners will begin shopping for a remortgage in the next few weeks to set themselves up for a more stable and fortunate financial situation in 2025.