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.

The average house price declined in the year to November 2023 by 2.1%. In the 12 months to October the decline was 1.3% which had been the fastest decline since June 2011, while the latest price is the fastest decline since 2009.

In the monthly comparisons, house prices declined from October to November by 0.8%. The average house price became £285,000, which is £6,000 lower than the average house price recorded for November 2022.

Higher interest rates are considered to be the reason for the lack of demand in the housing market during the time period reported on by the ONS.

The Bank of England’s Monetary Policy Committee (MPC) has increased the standard base interest rate from an all-time historic low of 0.1% during their December 2021 meeting to the current rate of 5.25%. The majority vote to hold the rate steady occurred during the last three meetings of 2023 as the inflation rate responded favorably and began a steep decline toward the target rate of 2.0%.

The current base rate is at a 15-year high. However, despite the MPC holding the rate steady, many lenders have chosen to cut their interest rate offers. There are both mortgage and remortgage deals on the market that are below the Bank’s base rate. The competitive lending market has created motivation in hopeful home buyers, and they are returning to the market for the beginning of 2024. 

The decline in the inflation rate has experts anticipating a rate cut by the MPC sooner rather than later. If a rate cut does occur in the first quarter of the year, it might not impact lender rates very much since they are already lower than what would have been expected with the current rate.

There was not a scheduled MPC meeting in January. The next meeting will be on 1 February. While a rate hike is very unlikely, the rate might remain steady rather than be cut for the first gathering of the year.

The ONS data is considered an important reflection of the housing market as it includes purchase transactions of both cash and those mortgaged. However, as mentioned, the data is behind other reports that are less comprehensive, but those reports do reveal more current housing market activity. The reports on the average house price that have been recently released reveal growing demand from buyers.

The rise in home buyer demand is considered to be due to lenders offering lower rates and there being a greater supply of properties on the market. Even with the expectation of lower interest rates in the near future, home buyers are taking advantage of the current opportunities. 

The housing market often has a boost at the start of the year as home buyers tend to be busier with the holidays than property shopping. Once the new year begins, their attention returns to the market and there are a greater number of purchases. However, the usual new year boost could be much more than a seasonal occurrence and more connected to other factors in the market not present at the end of last year.

In the next few weeks there will be a greater lens as to the state of the housing market. More market data will be available and the MPC will have met and made a decision on the base rate. If it stays steady, it could add more confidence to lenders and buyers alike, creating a strong showing from home buyers and adding confidence to the market and the economy.