Falling mortgage rates have led forecasters to overturn predictions that UK house prices will fall in 2024, suggesting instead that the average property price could rise by £61,500 over the next five years. .
In November, real estate firm Savills predicted average house prices would fall by 3% this year as recent increases in the Bank of England’s benchmark interest rate increased affordability pressures on prospective buyers.
However, while the base rate remains at 5.25%, competition among mortgage lenders has forced borrowing costs to fall since then, leading to increased market activity. As a result, Savills now expects average prices to rise by 2.5% to £292,000 in 2024.
Although it has revised down some of its long-term forecasts, it said it still expects growth to occur each year until the end of 2028, with average prices expected to rise by £61,500 (21.6%) to £346,500.
The number of homes expected to be replaced this year has also been revised upward from 1.01 million to 1.05 million.
Lucien Cooke, head of residential research at Savills, said: [November 2023] The forecast is expected as mortgage costs have fallen slightly and volatility has fallen significantly. The outlook for economic growth has also improved slightly, with relatively modest house price growth this year indicating even greater potential in the coming years. ”
The central bank’s benchmark interest rate is widely believed to have peaked, with some economists expecting a rate cut as early as March, but policymakers said at their last meeting that inflation would continue to fall. It is expected that the Bank will wait until it is confirmed that interest rates will be fixed, and leave interest rates unchanged again. when they meet this Thursday.
Mr Cook said Nationwide Building Society’s 75 per cent two-year fixed rate mortgage, which was 5.35 per cent in November, fell to 4.84 per cent this month, and the five-year contract fell to 4.5 per cent.
Those deals are no longer available as Nationwide and several large financial institutions have increased the prices of their deals in recent weeks, but interest rates are still below November prices.
“The competitive nature of the mortgage market has meant that lenders have priced in the potential for bank base rate cuts quite aggressively, leading to a slight recovery in buyer confidence and prices,” Mr Cook said. But he said this year’s price increases would create more affordability issues in the future.
Savills predicts prices will rise by 14.2% over the next five years in London, the most expensive city, but suggests growth may slow in lower-cost areas of the north-west of England, Yorkshire and the Humber. . About twice that.
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Separate figures released by rival estate agency Knight Frank show that prices in London’s most expensive postcodes have fallen by 2.6% in the past year.
The newspaper said that despite the large number of cash buyers, sales in prime central London markets were “not immune to the prevailing mood of hesitation” caused by fluctuations in mortgage rates. Ta.
Tom Bill, head of UK housing research at Knight Frank, said: “The close relationship between borrowing costs and demand has been evident across London in recent months. The number of offers as of April was 14% below the five-year average (excluding 2020), highlighting how weak demand is. ”
