After the Bank of England’s latest decision to hold interest rates for the second time in a row, there is a consensus beginning to emerge among economists and property experts, that the peak in borrowing costs may now have (finally) been reached.
It comes as attentions are turning, quite tentatively, to the topic of ‘next year’, and what 2024 might have in store for the mortgage and property markets.
Overall, the forecasts are reasonably optimistic that a period of relative stability is on the cards, and especially after Halifax this month recorded its first rise in house prices (1.1%) after a series of six months falls.
This subtle turn of economic events will, no doubt, come as welcome news to those home-buyers and sellers whose moving ambitions were thwarted this year, by the BoE’s most aggressive cycle of rate increases in a decade.
2024: The Outlook
With the first cuts to interest rates likely (although not guaranteed) in the second half of 2024, sentiment among sellers and buyers is slowly beginning to soften.
That said, affordability pressures are likely to persist for some time, and especially in areas of the South East and London, where buyer resilience and house prices have been hardest hit.
This disparity is owing, in part, to the fact that buyers in this area typically need to borrow more relative to their income, and provide, in turn, larger deposits.
Summary
Looking ahead to January, it is likely that a lower-than-average supply of homes will continue to strengthen prices, at least in the short term.
This trend will be further buoyed by the modest dip we’ve seen in mortgage costs, which has alleviated at least some of the affordability pressures on buyers.
With one more interest rate announcement set to be made on 14th December, it remains to be seen if 5.25% is - in fact - the end of the inflationary cycle that everyone hopes it is.
This, by all accounts, is more than likely, but with the possibility of further tightening of monetary policies not having been entirely ruled out (especially if inflationary pressures remain stubborn) an undertone of ambivalence prevails.
With this in mind, homebuyers and sellers are encouraged to take a measured view on 2024’s property market outlook.
This might involve, in part, drawing on an understanding of typical housing market cycles, and the narrow window of investment opportunity that potentially exists now, before 2025’s predicted house-price growth period comes into effect.