May 2024 Housing Market Update

May 2024 Housing Market Update

Published 5th June By Helen Challis
minute read

Following on from our previous mid-quarter housing market update in February, we’ve taken a look at the latest happenings in the industry, including movements in mortgage rates, the long-anticipated fall in the base rate, and house price movements across the south of England.

At A Glance

 
  • The Bank of England has kept the base rate steady at 5.25% for May 2024, but voting showed two committee members now in favour of a cut.
     

  • UK GDP grew by 0.6% in Q1 2024, ending the recent recession, though unemployment rose to 4.3%.
     

  • After a period of decline, average mortgage rates for 2-year and 5-year fixed rates  ticked up slightly in April and May 2024.

 
  • Some lenders, including HSBC, TSB, and Barclays, have announced modest reductions in new fixed mortgage rates, offering some relief to borrowers.

 
  • House prices fell by 0.4% in April 2024, with annual growth still positive at  0.6%.

 
  • The average asking price of properties coming to the market hit a new record of £375,131, rising 0.8% in the month (Rightmove)


Has the Bank of England base rate changed?

As expected, the BoE has kept the base rate static at 5.25% for May, though positive changes in the UK’s economic outlook suggest we could soon be looking at a base rate cut. 

Inflation has fallen significantly since it hit 11.1% back in October last year, but it dropped less than expected in March when it fell to 3.2% from 3.4% in February and 4.0% in January and December. This month’s news is a further fall to 2.3%, which is still above the BoE’s target of 2%, which raises the prospect of a reduction in Bank of England base rate, but probably not  as soon as next month. By keeping the base rate high at 5.25%, the Bank looks to have succeeded in taking the heat out of the economy and with further falls in energy and food inflation, the expectation is that the Bank will want to reduce rates shortly, rather than risk overshooting their target 2% and choking-off economic growth.

UK GDP grew by the most in almost three years in the first quarter of 2024, jumping by 0.6% and hoisting us out of the recession the country slipped into towards the end of last year. Wage growth has remained stubbornly high. However, with the unemployment rate rising slightly to 4.3%, the signs are that equilibrium may be returning. 



Are mortgage rates on the move?

In our February update, we discussed the slight decrease in mortgage rates, which had been slowly dropping since their peak in August 2023. Average mortgage rates for 2-year and 5-year fixed rates dropped to 5.18% and 5.24% respectively in March, but  started to rise again in April and May. 

 

Despite this, mortgage rates are still well below their peak last summer:

Date

Average 2-year fixed rate

Average 5-year fixed rate

Aug-23

6.85%

6.37%

Sep-23

6.70%

6.19%

Oct-23

6.47%

5.97%

Nov-23

6.29%

5.86%

Dec-23

6.04%

5.65%

Jan-24

5.93%

5.54%

Feb-24

5.56%

5.76%

Mar-24

5.18%

5.34%

Apr-24

5.80%

5.39%

May-24

5.91%

5.48%


Source: Moneyfactscompare.co.uk

The market as a whole continues to be highly sensitive to changes in mortgage rates, with the recent increase lowering demand, according to the April RICS survey. There is, however, hope on the horizon for both buyers and sellers, as lenders such as HSBC, TSB and Barclays have announced slight rate cuts on new fixed mortgages. We can also expect to see positive changes when the Bank of England finally announces a rate cut. 

Will mortgage rates drop in 2024?

Exactly when we’ll be seeing mortgage rates drop is uncertain, but the most recent inflation data suggests it will be sooner rather than later. Some experts are predicting the first cut to the base rate could come in either June or August. Once this does happen, we can expect mortgage rates to begin falling soon after.

How have house prices changed so far in 2024?

The dampened demand related to the increase in mortgage rates has been accompanied by the highest reported supply levels since September 2020. Despite this, house prices in April 2024 were still 1.1% higher than April 2023, according to the Halifax House Price Index, and Rightmove reported a 17% increase in sales agreed in the first quarter of 2024.



Overall, house prices remain broadly flat, with only small fluctuations month-on-month since January 2023. However, the market remains extremely price-sensitive, so it is vital that vendors do not over-price their property when they come to the market. With an average of 62 days required to find the average buyer, Rightmove are also emphasising the importance of accurate and realistic pricing. They point out that sales which only occur after a publicised price reduction take more than three times longer to find a buyer. 

 

With the recent announcement of a general election date comes a degree of short-term uncertainty, but the imminent prospect of a fresh start, whichever party wins, is likely to buoy the public mood which will undoubtedly be positive for the UK property market.

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