Buying a home in the UK remains a dream for many, but navigating the current mortgage market can feel like sailing through turbulent waters. Interest rate hikes, a cooling market and economic uncertainty have many asking: is now the right time to buy a UK property in 2024? While there are undeniable challenges, opportunities still exist for savvy borrowers. In this post, we’ll explore the current state of the UK mortgage market, offering insights and guidance for potential buyers, existing homeowners and those considering remortgaging.
Market Overview: Shifting Tides
The past year saw major shifts in the UK mortgage market. Following a period of historically low interest rates, the Bank of England began raising rates in December 2021 to combat inflation. This resulted in:
- Higher mortgage rates
The average two-year fixed rate currently stands at 5.58%, while five-year deals average 5.22%. While these represent a slight decrease from peaks earlier in 2024, they remain considerably higher than pre-2022 levels.
- Mortgage lending decrease
UK Finance predicts a fall in mortgage lending in 2024, with remortgaging activity anticipated to decline after a peak in maturing fixed-rate deals.
Increased pressure on homeowners: Rising living costs combined with higher mortgage payments could strain finances for some homeowners.
- Challenges and Opportunities for BorrowersThis evolving landscape presents both challenges and opportunities for different borrower segments:
- First-time buyers: Higher entry barriers due to stricter affordability checks and larger deposits required. However, a cooling housing market might present lower property prices, offering some balance.
- Existing homeowners: Remortgaging to secure a better deal can be beneficial, especially for those currently on expiring low-interest fixed rates. However, careful budgeting is crucial due to higher monthly payments.
- Buy-to-let investors: Stricter lending criteria and lower rental yields make buy-to-let less attractive. Alternative investment options should be explored.
Key Considerations for Navigating the Market
- Affordability: Conduct thorough budgeting to ensure you can comfortably afford monthly repayments with higher interest rates.
- Deposit size: Aim for a larger deposit to reduce borrowing and secure better mortgage rates.
- Fixed vs. variable rates: Weigh the stability of fixed rates against the potential flexibility of variable rates, considering your risk tolerance and financial goals.
- Seek professional advice: A mortgage advisor can guide you through the complexities of the market, matching your needs with the most suitable products and lenders.
Beyond the Headlines: Hope on the Horizon
While the UK mortgage market faces challenges, positive developments offer hope for potential buyers and homeowners. Consider the following key points:
- Mortgage rate stabilisation
While interest rates remain higher than in recent years, they appear to be stabilising after initial hikes and it is highly predicated that the Bank of England base rate has now peaked after multiple months of no additional increases.
- Government support schemes
Initiatives like the Mortgage Guarantee Scheme can aid first-time buyers with smaller deposits.
- A cooling housing market
Potential house price softening in some areas of the UK could make property more affordable.
Crucially, the UK mortgage market is very dynamic and circumstances can change quickly. Staying informed, conducting thorough research and seeking professional advice are crucial for making informed decisions in this evolving landscape.
Read about the UK Housing Market via our Specialist Residential & Buy to Let Division