UK Mortgage Market Overview 2024 | WIS Mortgages
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30th January 2024

UK Mortgage Market Overview 2024

As we step into 2024, the UK mortgage market presents a complex yet promising landscape for those looking to secure a mortgage. Post-Brexit economic adjustments, combined with global economic shifts, have significantly influenced the UK's mortgage sector. 2023 was a difficult year for both lenders and those looking to secure a property, with increased interest rates and a competitive housing market. To find out if 2024 holds more promise, this article aims to provide an overview of the current state of the UK mortgage market, analysing trends, challenges, and prospects.

Market Trends in 2024

2023 saw lots of fluctuating interest rates, largely influenced by the Bank of England's monetary policy. With the economy stabilising after the tumultuous years of the COVID-19 pandemic, interest rates have seen a gradual increase which has been carried over into 2024. This rise affects both existing and prospective homeowners, altering monthly repayments and affecting borrowing capacities. Although the base rate is still 5.25 %, the Bank of England's Monetary Policy Committee has outlined that, with any hope, this rate should drop by the end of the year to 4.25 %. - until you own the property outright.

Shift in Lending Practices

Lenders in 2024 will likely adopt more stringent lending criteria to protect their investments. Post-pandemic financial uncertainties have led to a more cautious approach when it comes to mortgages and lending, with a focus on ensuring borrowers' ability to repay. Credit score requirements, loan-to-value ratios, and debt-to-income ratios are among the key factors seeing tighter controls.

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Government Policies and Regulations

2024 will likely experience several regulatory changes aimed at ensuring market stability and consumer protection. These include adjustments to the Mortgage Market Review (MMR) guidelines and the implementation of more stringent stress testing for borrowers.

Help-to-Buy Scheme and Alternatives

The government's Help-to-Buy scheme played a big role in assisting first-time buyers, but this scheme ended in 2023. Alternative solutions are available, such as guarantor mortgages, so they will likely play a bigger role in 2024 and beyond.

Stamp Duty Land Tax (SDLT) Considerations

The SDLT holiday, introduced as a response to the pandemic, wasn't available in 2023, reverting to previous rates. This is expected to be the case for 2024 too, which will impact the property market by potentially slowing down the surge in property transactions seen in recent years.

Market Challenges

Housing affordability was a significant sticking point for many prospective homeowners in 2023. Due to the heightened cost of living and spike in interest rate rises which began in 2022, many people looking to secure a mortgage struggled to pass the affordability tests. As a result, mortgage lending dropped in 2023 by almost a quarter. 2024 will still have to deal with these problems, but hopefully, the lower cost pressures will make it a little easier to secure a mortgage this year. Mortgage interest rates in 2024 should eventually decline, which will lower the barrier to entry for many prospective homeowners.

Economic Uncertainty

Economic uncertainty, partly due to global trade dynamics and the aftermath of Brexit, continues to affect the mortgage market in the UK. Currency fluctuations and inflation rates are among the key factors influencing both lenders and borrowers. In 2024, boons such as expected wage growth of 2.5% will provide people with more disposable income, which should offset some of this economic uncertainty and balance the housing market somewhat.

Environmental and Sustainability Issues

There is growing attention on the environmental impact of properties, with lenders increasingly considering energy efficiency in their mortgage offerings. Green mortgages, offering favourable terms for energy-efficient homes, are becoming more prevalent. This could start a push for more eco-friendly housing options while also boosting the mortgage market.

Consumer Behaviour

The demographics of UK homebuyers are changing. There's an increase in older borrowers, partly due to longer mortgage terms and later life lending. There is also a noticeable trend in remote working arrangements influencing homebuying decisions, with a shift towards properties outside of major urban centres. Although it's early days, this could cause a shift in where people are choosing to live, which could impact regional property prices.

Rental Market Influence

The rental market continues to exert an influence on the mortgage sector. High rental costs in many areas are pushing individuals towards homeownership, despite the challenges of securing a mortgage. With over one-third of households renting their property, there is a good chance many people will transition from renting towards home ownership in 2024.

Predictions for 2024 and Beyond

Looking ahead, the UK mortgage market is poised for gradual growth - which is great news for those looking to secure a property via mortgage. Interest rates are expected to stabilise, and while lending criteria may remain strict, more disposable income is likely to make securing a mortgage viable for more people in 2024 and beyond.

Potential for New Lending Products

The market may see the introduction of innovative lending products, designed to address specific challenges such as affordability and sustainability. Lenders are likely to explore more flexible and tailored mortgage solutions to cater to a diverse range of borrowers. This might mean a greater push for things like shared ownership properties.

The Role of Government and Regulators

Government policies and regulatory frameworks will continue to shape the market. Ongoing adjustments to schemes like Help-to-Buy, along with regulatory changes in response to economic conditions, will be crucial in maintaining market stability and protecting consumers. Although the government hasn't announced a viable replacement for the help-to-buy scheme, it is hoped that other schemes may take its place.

2024 Holds Hope for Prospective Homeowners

The UK mortgage market in 2024 is a dynamic and evolving landscape. Challenges such as affordability, economic uncertainty, and the need for sustainable lending practices are at the forefront. However, opportunities for growth and innovation provide a positive outlook for the sector. As the market adapts to changing economic conditions and consumer needs, it remains a vital component of the UK's financial landscape.

If you're looking to get on the property ladder but don't know the best path to take, let our team at WIS Mortgages help. Contact us today for mortgage advice and guidance to help you secure the most appropriate financial product for your needs.

Frequently Asked Questions

Q. What are mortgage rate predictions for 2024?

A. Although you can still get a shared ownership in many situations, such as if you have poor credit, it isn't a guarantee. Lenders will look at your specific circumstances to decide whether or not a mortgage will be viable for you.

Q. How far will house prices fall in 2024?

A. According to many big lenders, including Lloyds Bank, average property prices are expected to fall by 2.4 % in 2024. Prices should recover by 2025, so buying a property in 2024 could be a great option.

As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments.

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