The housing market has proved to be resilient once more, and lenders are being credited with the turnaround from the gloom and doom predictions for 2024. As last year was nearing a close, all signs pointed to a difficult year ahead. Home buyers were exiting the housing market. Some were leaving due to a lack of confidence in the economy, others due to the higher cost of borrowing, and others simply because they could not afford to buy. Despite the Bank of England holding steady on the standard base interest rate, the lack of borrowing spurred lenders to make their own cuts to increase demand.

With lenders offering interest rates lower than the Bank of England’s standard base interest rate, homeowners and home buyers are taking notice and advantage of the opportunity to save money. They certainly should, because the lower rates are due to lenders being in a competitive environment versus basing their rate choices on the decisions of the Bank’s Monetary Policy Committee (MPC). Through most of 2023, the MPC was increasing the base rate. Votes to hold it steady did not occur until the final three MPC meetings of the year. There certainly was not a vote to cut rates, so lenders took the initiative to do so without direction of the MPC.

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.

Home buyers have returned to the housing market and the average house prices have had the strongest start to the year since 2020. With a greater supply of available properties coming to the market, and lower interest rates than would have been expected, home buyers are showing up and taking advantage of the current opportunities. While there is a typical uptick to the housing market following a slow buying period of the holiday season, the data has shown hopeful home buyers are eager to climb the property ladder and did at a greater pace than usual.

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%.