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Ian Chetwynd and Paul Penman are Wren Sterling’s Mortgages team. With many years in the business, they’ve seen the good times and the bad, so what do they think is going to happen in 2024?
Housing looks set to be one of the key battlegrounds in the fight for the next general election.
A growing population, lacklustre homebuilding and a squeeze on mortgage finance have “broken” the UK’s housing system, housing secretary Michael Gove said in February 2024.
He worried that this could lead to young people feeling “shut out” from both “the financial markets and democracy” and he is understood to have the backing of Prime Minister Rishi Sunak.
But, last year the UK added 234,400 dwellings, unchanged compared to the previous 12 months. This is according to the Department for Levelling Up, Housing and Communities data, from November 2023.
This is below the 2019 Conservative manifesto target of adding 300,000 homes a year by the mid-2020s.
In contrast, Labour leader Keir Starmer has promised to build 1.5 million homes over five years if the party is returned to government, through a combination of looser planning rules and green belt construction, which (at 1.5m divided by 5 = 300,000) is the same as the previous Conservative target, so it remains to be seen whether this will be more successful.
Set against this backdrop, Chancellor Jeremy Hunt is under pressure to deliver a set of measures that begin to unlock the housing market ahead of the country going to the polls, widely expected to be in November.
Stamp duty
The temporary £425,000 first-time buyer stamp duty threshold should be made permanent, say a range of groups as a way to boost activity among these borrowers, who make up around a third of all homebuyers.
It was raised from £300,000 as part of the disastrous mini-Budget in September 2022, but two months later Hunt said the level would return to its old level in March 2025, as part of his bid to stabilise the UK economy at the time.
Interest Rates
Kicking off 2024 with a rate war, lenders showed they meant business this year. Now, the question on everyone’s mind is whether rates will continue to fall.
While the rate cuts we have seen so far can be attributed to falling swap rates and the anticipation of interest rate cuts later in the year, what appears to be playing just as big a role — if not bigger — is lender competition.
The onset of a new year usually reawakens lenders’ competitive side as they aim to meet their lending targets. However, this year, more than ever, discounts have been substantial.
The fact that January’s surprising uptick in inflation did not inhibit lenders’ rate cuts suggests that competition is playing a large part in driving down rates.
So, what can homebuyers expect over the course of 2024?
In a fast-paced market, predicting what will happen next is challenging. However, all the signs point to a competitive year ahead for pricing. At this stage, further interest rate hikes seem unlikely, which should keep the cost of funding relatively stable.
There are, of course, inflation concerns, as well as threats from events on the global stage, which are ever present.
Lender appetite, at least for the first half of the year, should ensure that rates are kept competitive. The mortgage market benefits from almost 80 lenders, most of which will be competing for business and looking to meet their targets.
Notwithstanding any major new events either at home or abroad, this competition should prevent significant increases in mortgage rates.
If anything, we may see further cuts.
Remortgaging
Over 1.6 million mortgages are due for renewal in 2024 with most customers facing a considerable hike in their rates and payments, as their fixed terms come to an end. Remember the good old days of record low interest rates and fixed rates below 1%? They’re long gone now, so it is even more important to scour the whole of the market.
Remortgage rates could come down in 2024 if current inflation figures stay on their trajectory, but the world always surprises us.
We strongly recommend that mortgage holders seek advice when they are 6 months away from their renewal date as we can assess the options and potentially reserve a product or secure a formal mortgage offer. If things improve between then and the completion of the remortgage, you can benefit from improved terms, but waiting too long could mean you’re at the mercy of lenders and their rate changes!
IMPORTANT: your property may be repossessed if you do not keep up with your mortgage repayments.
