As we finally approach the end of a long, challenging year in the mortgage world, the question on everyone’s lips is, “What next?”.
I must say I have got progressively more optimistic over the past days, despite the lack of movement from the Bank of England and Governor Andrew Bailey’s continued rhetoric that rates are set to stay high.
Whilst it was no surprise that there was no change in the Bank Base Rate last week, it was a surprise that three members of the committee voted for a further rise! This does beggar belief and makes you wonder whether they know something we don’t, or that they are just hopelessly out of touch with the reality on the high street.
Especially when we have just seen the latest revised figures from the Office for National Statistics, (ONS), showing that the economy actually fell by 0.1% in Q3, revised downwards. Given that Q4 does not look that much better we could already be in a technical recession; it could be a close call.
We have now seen inflation fall further than expected by pretty much every economist, which is good news for everyone.
The rate of Consumer Prices Index, (CPI) inflation fell to 3.9% in November from 4.6% in October, according to the ONS.
The more important Core CPI (which excludes energy, food, alcohol, and tobacco) rose by 5.1% in the 12 months to November 2023, down from 5.7% in October.
This latest fall in inflation will bring some early Christmas cheer to both policymakers and consumers alike.
This will no doubt have an impact on SWAP rates which in turn will allow mortgage lenders to continue to reduce their product offerings as the January mortgage sales look set to become even more intense.
There is more bullish talk that it will fall more quickly in the new year, bar the odd stutter as certain world events could influence fuel and food costs.
All of this taken together, does make it seem that the Bank of England are in danger of being behind the curve on rate cuts, as they always seem to be, and there are some who believe the first Bank Base cut could come as early as Q1 next year, with a further two or three cuts over the year.
Because of the above, we have already seen SWAP rates fall markedly over the last few days, with 2-year money now at 4.04% and 5-year money at 3.37%.
With mortgage lenders getting into the swing of the new competitive environment and eager to both retain existing customers and attract more to increase or maintain their market shares, it looks like the January sales are set to come early to the mortgage market.
We have already seen one lender produce a sub-4% five-year fixed rate and it will surely not be long before other lenders follow suit. The new environment where rates start with a 3 could be upon us sooner rather than later.
This is good news not just for prospective buyers, but also for the thousands of existing mortgage borrowers whose products are expiring in 2024. The message here is to start planning as soon as possible, and it is never too early to speak with your broker to see what additional costs you could be facing and work out a plan to mitigate them.
Both the ONS and Zoopla have recently reported that average UK house prices have fallen by around 1.2% in the 12 months to October.
ONS stated that the average UK house price was £288,000 in October 2023, which was £3,000 lower than 12 months ago.
In fact, Zoopla reports that market sentiment has been improving recently with new sales up 17% and demand 19% higher as buyer sentiment improves.
First-time buyers are the most active and look likely to continue to be during 2024 as mortgage payments now compare favourably with ever-increasing rental payments.
Even though house prices will continue to ease, predictions over the next year are for a small fall of 2% to 3%, depending on area. Those doom-mongers predicting crazy price falls are going to be wrong yet again, missing the points around a tight labour market, tougher affordability rules around mortgages since 2015, (stress testing at higher rates has proved to be successful), and the fact that lenders now have more tools in their armoury to offer forbearance before repossession.
All of this has implications for the property market as a whole and we could see prospective buyers return to the market in earnest early next year before increasing demand starts to put pressure on house prices to start to increase once more, especially in popular areas, as 2024 shapes up to be a good year to buy.
The big question for next year is when the low point and the optimum time will be to buy. Trying to play the market to that degree is fraught with danger, so I would always say buy when it suits you and is affordable to do so and the market will take care of itself.
A home is a home to create memories in, not a short-term investment to play with.
Oh, and before I go, I would also urge everyone to make 2024 the year to review your protection needs, whether life, family or income protection, this stuff really does matter.
It just leaves me to say that all of us at Coreco would like to wish you and your families a Merry & safe Christmas, Happy Holidays & a peaceful, healthy and prosperous New Year
We can’t wait to see what 2024 brings!
In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 4.62% (8.20% APRC) and 5-year fixes from 4.28%, (7.00% APRC), whilst variable discounted rates are around from 5.29%, (7.80% APRC) and variable tracker rates from 5.39% (8.00%).
Those looking at Buy-To-Let can now obtain products from 4.19% (8.20% APRC) for a 2-year fixed, 5.50%, (8.20% APRC) for a 2-year tracker or 5-year fixes are available from 4.26% (4.80% APRC).
If you want to speak to one of our friendly, down-to-earth advisers, please click here or call us on 020 7220 5100.
Please see below as to when our phone lines will be open:
25th December – Closed
26th December – Closed
27th December – 10am-2pm
28th December – 10am-2pm
29th December – 10am-2pm
1st January – Closed
2nd January – Re-open as normal for the New Year