For those unfortunate enough to be seeking a new home or a property investment opportunity in what has been noted as one of the worst times to be a UK homebuyer in recent history, you may have noticed that mortgage rates are not quite what they used to be.
With the UK undergoing a staggering 14 consecutive interest rate increases since 2021, many have experienced a cumulative knock-on effect that has spread to house prices, the cost of living and beyond. And, with industry experts warning that only 20 to 25% of the impact of interest rate hikes on the UK economy has been experienced so far, 2024 is shaping up to be a financially turbulent year.
But how will mortgage rats specifically be impacted by these economic changes? And, by extension, how much of this burden will be imparted to the housing market in general? The professionals at Concept Capital Group have researched forecasts and data surrounding the future of the UK housing market to give potential property investors an insight into what they might expect in 2024 and beyond. For a general understanding of where housing is heading and what you can do to stay afloat, this article could be the jumpstart you need.
What’s In Store For the UK’s Economy?
According to a recent report by the Office for Budget Responsibility (OBR) covered by the BBC, millions of people in the UK are currently both borrowers and savers, representing the majority of the population. As a result of this overrepresentation, the current imbalance between how difficult it is to save and how necessary it is to borrow has significant implications for the financial future of the country. More specifically, while mortgage rates could fall slightly throughout 2024, analysts speculate that savings rates may have peaked as well, meaning the overall financial liquidity of the average UK citizen may be relatively unchanged.
Further data pulled from the OBR’s Economic and Fiscal Outlook for November 2023 shows the following:
- Inflation is expected to remain higher for a longer period and is only expected to fall to its 2% target by the second quarter of 2025 at the earliest
- Borrowing is expected to be reduced by an estimated £27 billion in 2027-28, falling steadily from 5% of annual Gross Domestic Product (GDP) in 2023 to 1.1% by 2028-29
- Average interest rates on the stock of mortgages available are expected to rise from a recent low of 2% in 2021 to a peak of 5% in 2027
- Higher mortgage rates are expected to take longer to pass through to the stock of mortgages than in past years due to a significant increase in the number of fixed-term mortgage contracts currently outstanding
- Since falling to their lowest level since the pandemic this year, housing transactions are expected to remain weak throughout 2024 due to higher mortgage rates affecting housing affordability
- House prices are expected to decline by 7.6% by the end of 2024, but are particularly sensitive to potential interest rate and household income growth
These figures suggest that the next few years could present financial challenges that homeowners, homebuyers and mortgage holders could be particularly affected by. The reduced rate of borrowing especially could signal that the housing market could encounter further stagnation and affordability issues going forward as an increased number of potential buyers are locked out by elevated mortgage rates.
What to Expect From 2024’s Mortgage Rates
Mortgage rates are largely a factor of other market elements such as interest rates and inflation converging to shift the offers populating the market. With the UK’s financial future shifting towards austerity and the mounting risk of a recession playing a role, it seems increasingly likely that mortgage rates will only worsen despite recent short-term improvements.
In a recent press release following their outlook for the financial services industry, global professional services firm EY forecasted decade-low mortgage lending growth as a result of mortgage rates reaching their highest levels since 2008. In the release, EY stated that mortgage loans in 2023 are expected to rise by just 1.5%, with 2024 only showing a marginal improvement at 2%. Similarly, UK bank loans are only expected to rise by 1.5% by the end of the year, with bank-to-business lending also falling to 0.5%. Altogether, this represents a dip in lending power that is expected to impact the market at several levels.
Zoopla also painted a negative landscape for mortgages in the next few years, with a recent article evidencing the following:
- House prices are expected to fall by 2% throughout 2024
- The number of homes for sale has reached a 5-year high, which will require sellers to be more competitive by lowering prices in 2024
- 4 in 5 housing markets are registering annual price falls, with 2024 expected to show an increase in the number of falls and weaker buying power overall
- Homes are currently overvalued, meaning further falls are to be expected
With the average UK two-year mortgage recently rising to 6.01% and aid for mortgage holders seemingly increasingly unlikely, the chances of 2024 offering solutions rather than intensifying existing mortgage rate turmoil seem slim.
An article released by The Guardian earlier this year showed that an estimated 700,000 UK households had reported missing or defaulting on a rent or mortgage payment in April 2023. And, with Labour further warning that over half a million UK homeowners could face surging mortgage costs before next year’s local elections, the likelihood of a full-on ‘mortgage meltdown’ seems to be mounting every day. In short, 2024’s mortgage rates could be a threat to every stakeholder navigating the UK housing market.
The Benefits of Mortgage-Free Property
For those seeking property investment opportunities that avoid the pitfalls of overinflated mortgage rates, there are options still available to everyday investors.
At Concept Capital Group, we offer mortgage-free property investment opportunities in buy-to-let modular housing. Due to the nature of our properties and the carefully tailored investment packages we have built around them, Concept Capital Group has created a uniquely affordable source of passive income that negates the need for costly borrowing and monthly repayments.
For a single upfront payment of £42,999, you can obtain full ownership of a high-quality modular home designed to balance comfort and modernity with the age-old reliability of buy-to-let property. That means all the benefits of monthly rental income from a fully managed, hassle-free property without the additional fees or mortgage maladies.
To find out more about investing in property without getting mixed up in mortgage rates, contact our team today.