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February 2024 Housing Market Update
As long-established estate agents in Poole, we’re well acquainted with the ebb and flow of the tide against our shores. And after a year of record inflation and seemingly ever-increasing mortgage rates, we’re asking the question: is the tide finally turning on the UK housing market?
At A Glance
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How did inflation impact mortgage rates in 2023?
In October 2022, inflation hit 11.1% amidst the ongoing cost of living crisis. In short, inflation refers to the rate at which prices are rising over time: so despite the rate having slowed significantly since then, prices are in fact still rising. In December 2023, inflation was at 4.0%, a slight rise in November’s figure of 3.9%.
But what does this have to do with mortgages? Well, in order to slow the rate of inflation, the Bank of England increases the base rate, which is what banks use to create the rates they pass on to their customers when they borrow money (such as when buying a house). In theory, this should cause people to save more and spend less, pushing down demand for goods and services and thus lowering prices - eventually leading to lower inflation.
Since December 2021, the base rate has been increased 14 times, starting at a record low of 0.1% and bringing us to the current rate of 5.25% which has remained unchanged since August 2023. As the rate of inflation has certainly been slowing, we can assume this method has been effective: however, the increase in base rates also has an impact on the housing market.
The higher the base rate, the more expensive it is to borrow, which means less people can afford to buy. This lowers demand, which causes average house prices to drop.
What are the current UK mortgage rates in 2024?
Lenders regularly change their mortgage rates, with figures changing week-on-week. With the Bank of England continuing to hold the base rate at 5.25%, average mortgage rates are continuing to slowly decrease.
The table below shows the average mortgage rates for both 2-year and 5-year fixed rate mortgages from between January 2023 and January 2024. Mortgage rates peaked in August 2023, which is when the base rate was increased to 5.25%. Since then, rates have been slowly climbing down.
Date | Average 2-year fixed rate | Average 5-year fixed rate |
Jan-23 | 5.79% | 5.63% |
Feb-23 | 5.44% | 5.20% |
Mar-23 | 5.32% | 5.00% |
Apr-23 | 5.35% | 5.05% |
May-23 | 5.26% | 4.97% |
Jun-23 | 5.49% | 5.17% |
Jul-23 | 6.39% | 5.96% |
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% |
Source: Moneyfactscompare.co.uk
The current average mortgage rates are sitting just below 6.00% for 2-year fixed mortgages, and around 5.50% for 5-year fixed mortgages.
Are mortgage rates going to drop in 2024?
As it stands, financial experts are predicting that the base rate has reached its peak and that some time into 2024, it will begin to drop. This change will be reflected in mortgage rates, which are expected to remain stable in the first few months of the year before beginning to decrease.
However, it’s important to remember that mortgage rates are dependent on more than just the Bank of England base rate - this is why it’s so hard to predict what could happen in the coming months. On top of that, there is no way of knowing when the Bank of England will decide to drop the base rate.
What happened to house prices in 2023?
2023 saw house prices decrease on the whole, despite increased stability in many areas towards the end of the year. There are a number of respected data sources, each with different ways of collecting house price information:
The UK House Price Index
Regarded as the most accurate of various house price indices, the UK House Price Index uses data straight from government sources such as the HM Land Registry. It’s calculated based on completed sales, as opposed to asking prices, and includes both cash sales and mortgage sales.
The data is published with a few months’ delay, so the latest data available as of February 2024 is from November 2023. In the table below, you can see the average house price in the UK as a whole fell by a total of 2.1% in the 12 months to November 2023. In the Bournemouth, Christchurch and Poole local authority area where our Poole estate agents is based, the average house price fell by 5.9% in the same period.
Average house price | Monthly change | |||
UK | BCP | UK | BCP | |
Nov-22 | £291,092 | £351,877 | 0.0% | 0.4% |
Dec-22 | £289,008 | £349,767 | -0.7% | -0.6% |
Jan-23 | £285,759 | £347,060 | -1.1% | -0.8% |
Feb-23 | £283,598 | £344,195 | -0.8% | -0.8% |
Mar-23 | £280,489 | £338,277 | -1.1% | -1.7% |
Apr-23 | £281,049 | £332,956 | 0.2% | -1.6% |
May-23 | £281,924 | £331,043 | 0.3% | -0.6% |
Jun-23 | £284,140 | £329,925 | 0.8% | -0.3% |
Jul-23 | £289,824 | £331,669 | 0.5% | 0.5% |
Aug-23 | £291,000 | £330,399 | 0.3% | -0.4% |
Sep-23 | £291,000 | £331,227 | 0.0% | 0.3% |
Oct-23 | £287,782 | £334,990 | -0.7% | 1.1% |
Nov-23 | £284,950 | £331,174 | -0.8% | -1.1% |
Source: UK House Price Index
The Nationwide House Price Index
The Nationwide House Price Index is calculated using their own mortgage approval data. Whilst limited in that this index doesn’t include cash buyers, it still provides a useful snapshot of current house prices.
Since the beginning of Q4 in 2023, Nationwide has reported monthly increases in house prices, except for December where there was no change. In January 2024, they reported an increase of 0.7%, though they have also stated that a rapid increase in house prices this year is unlikely, despite looking more positive than this time last year.
Monthly change in house prices | |
Jul-23 | -0.2% |
Aug-23 | -0.8% |
Sep-23 | 0.0% |
Oct-23 | 0.9% |
Nov-23 | 0.2% |
Dec-23 | 0.0% |
Jan-24 | 0.7% |
Source: Nationwide House Price Index
What is the outlook like for house prices in 2024?
Back in October, Knight Frank predicted that UK house prices would fall by 4% in 2024, citing a looming general election as one of the reasons for this forecasted decrease. Speculation over the government’s stability doesn’t exactly increase people’s confidence in the housing market. Other global risks such as the ongoing conflict in the Red Sea also increase the possibility of higher rates of inflation and the impact this has on the housing market.
However, in January 2024, Knight Frank revised their previous prediction in light of a more positive outlook in the final quarter of 2023. UK house prices are now expected to actually rise by 3% in 2024, suggesting we could finally be turning a corner.
Will demand rise in 2024?
According to the RICS UK Residential Market Survey, released in January 2024, surveyors are reporting an increase in both supply and demand for the first time since March 2021. This points to increased stability in housing prices as there is less pressure on prices to either fall or rise. This has come alongside an increase in consumer confidence as inflation rates are finally decreasing and the risk of recession is subsiding.
The falling mortgage interest rates are also supporting the increasing levels of demand, and this is likely to improve further if the base rate drops later in 2024. However, we cannot be certain when this will happen, which is why many lenders are putting the brakes on any further reductions for now.
It’s no secret that the housing market in the UK, including in areas like Poole, has undergone significant shifts and challenges throughout 2023. From record inflation to fluctuating mortgage rates, homeowners and prospective buyers have been forced to navigate an imposing landscape. However, as we move into 2024, there are signs of cautious optimism.
The stabilisation of the Bank of England's base rate at 5.25% since August 2023 has provided some stability, alongside the gradual decrease in average mortgage rates. This has contributed to a more balanced market, reflected in the recent stabilisation and even slight increases in house prices.
Forecasts for 2024 have shifted from earlier predictions of a decrease to a potential rise in house prices by 3%, indicating a possible turning point in the market. Factors such as increased stability in supply and demand, alongside decreasing inflation and the potential for further drops in mortgage rates, contribute to this positive outlook.
However, uncertainties remain, including the possibility of global events impacting inflation rates and the timing of any future adjustments to the base rate. As such, while the market appears to be on a more positive trajectory, vigilance and adaptability will continue to be key for both buyers and sellers in the months ahead.
At Quay Living, we are proud to offer the most comprehensive residential sales and lettings service in Poole. Our local knowledge and expertise sets us apart from the rest: you name it, we can help.
Whether you’re selling or buying, letting or renting, feel free to contact our Poole estate agents to get the ball rolling. We look forward to hearing from you!