Mortgage repayments have soared in 2023 but as the year draws to a close, and rates begin falling, is there cause for optimism in 2024? Mortgage expert, Darren Polson, offers his thoughts
This year has probably felt like a long, hard slog for those looking to buy a new home, whether it’s the first time or moving to another property.
As the months have passed we’ve all been looking for signs – even just the slightest hint – that the housing and mortgage markets were beginning to look more stable. So much so, it would have been easy to place too much emphasis on isolated pieces of good news and decide everything was well again.
However, as we head towards the end of year, it’s fair to say that the number of positive indicators are growing, albeit we remain a long way from declaring that we are out of the economic woods.
Firstly, the Consumer Prices Index (CPI) annual inflation rate was 4.6% in October this year – down from 6.7% in September.
Secondly, the Bank of England Base Rate has remained steady at 5.25% – on the face of it, the central bank’s actions appear to be having the required effect on inflation.
Thirdly, Halifax reported house prices increased by 1.1% in October compared to September. A number of factors could be involved here but it may be a sign that activity in the market is growing.
So, thus far, it’s all looking up, well, at least better than it has been.
What’s happening to mortgage rates at the moment?
However, the most important aspect for borrowers is what lenders are doing. And yes, this is also looking more positive.
We have seen swap rates fall which means lenders have reduced rates – this is important.
In November quite a few lenders including big players such as Halifax, HSBC, Yorkshire Building Society and Virgin Money, revealed new sub-5% two-year fixed rate mortgages. There were no lenders offering sub-5% two-year fixed rates deals at the start of October.
In fact, at the time of writing, there were over 27 lenders offering fixed rate mortgages of less than 5% (across a range of terms not just two-year fixed deals), compared to 13 back at the beginning of October.
This is indeed positive news.
In addition, for those who are existing mortgage holders, many lenders are cutting product transfer rates. These are deals for existing customers who, when their current mortgage ends, switch to a new mortgage with the same lender.
One example of this is NatWest which is cutting residential rates for exiting customers by up to 0.40% from 21 November. This means a five-year fixed rate deal could be 4.95% with a fee – lower than the Bank of England base rate.
What will happen to mortgage rates in 2024?
All good news? Yes and no.
Whilst the rate of inflation is coming down, this simply means that the price of goods in the shops is still rising, just at a slower rate.
Furthermore, there are still some huge global issues, not least conflicts in Ukraine and Gaza, which still carry a big risk of affecting economies around the world, including here at home.
That said, there is evidence that confidence is beginning to seep slowly back into the economy and we can see this on the ground with a growing number of enquiries coming through our mortgage brokers across the country.
Given the volatility the economy has endured over the last few years, a fair bit self-inflicted by the UK government itself, it would be unwise to assume it will be all plain sailing from here on.
However, a degree of cautious optimism is not unreasonable in the circumstances and if you are a first-time buyer or looking to move and have been holding off, now may well be a good time to start exploring the market, beginning with a conversation with an independent mortgage broker.
Darren Polson is head of mortgage operations at Aberdein Considine
