The UK housing market is experiencing a surprising turn of events as a decline in mortgage rates has prompted a leading forecaster to reverse its predictions of a fall in house prices in 2024. Savills, a prominent property company, had previously forecasted a 3% decrease in the average price of a home this year due to affordability pressures on buyers. However, with mortgage rates dropping and increased competition among lenders, Savills now expects the average price to rise by 2.5% in 2024 to £292,000.
This positive outlook extends beyond just this year, as Savills predicts that average prices will continue to rise over the next five years, with a total increase of £61,500 or 21.6% by 2028. The number of homes expected to change hands in 2024 has also been revised upwards, indicating a more active market.
Lucian Cook, the head of residential research at Savills, attributes this shift in forecast to the more stable mortgage costs and improved economic growth outlook. While some economists speculated about a potential rate cut, policymakers have opted to wait and see if inflation continues to fall before making any changes.
Despite the recent repricing of mortgage deals by lenders, rates still remain below November’s prices, fueling buyer confidence and price recovery. However, rising prices may lead to affordability challenges in the future.
In London, where prices are already high, Savills predicts a 14.2% increase over the next five years, while regions like the north-west of England and Yorkshire and the Humber could see even higher growth rates due to lower initial prices.
On the other hand, Knight Frank’s figures show a 2.6% decrease in prices in London’s most expensive postcodes over the past year. The estate agent notes that even with a significant number of cash buyers, prime central London markets have been affected by fluctuating mortgage rates, leading to a decrease in offers made.
Overall, the housing market in the UK is experiencing a period of transition, with mortgage rates playing a significant role in shaping future price trends. As buyers navigate these changes, the market is expected to remain dynamic and responsive to economic conditions.