26 Nov 2024

Experts review the 2024 UK property market

By LendInvest Mortgages

Much like the previous year, 2024 brought many challenges to the UK property market. From the UK general election, which resulted in the first Labour-led government in 14 years, to a constantly evolving consumer landscape that confronted a higher cost of living, it’s safe to classify this year as a “rollercoaster.” 

The economic impact on mortgages - By Hugo Davies, Managing Director

For the UK economy, 2024 has been a mixed year. Inflation cooled significantly, dropping to 1.7% in September – below the Bank of England’s 2% target1 – offering relief to consumers and businesses after a period of rising costs and reduced spending. As domestic inflationary pressures ease, financial markets are now anticipating interest rate cuts through to 2026. Despite some market volatility, progress on inflation allowed the Bank of England to reduce the base rate from 5.25% to 5% in August, followed by a further cut to 4.75% in November1, with further decreases expected.

As rates continue to fall, asset prices are stabilising, and activity is picking up across the mortgage finance landscape. Although this projection is slightly higher than previously forecasted, the mortgage market remains resilient. Mortgage approvals have nearly returned to pre-pandemic levels, with remortgage approvals up 52% year-on-year as of September 2024. Additionally, two-year fixed mortgage rates have decreased from 5.15% in late September 2023 to 4.9% a year later, while house prices have risen by 2.2% over the same period, supported by easing inflation and stable household budgets.

Consumer spending - By Jason James, Corporate Account Manager

The lingering effects of the pandemic, combined with rising interest rates and the end of government support schemes, put a significant strain on household finances. As a result, consumer debt soared, leading to a noticeable increase in individual insolvencies. In Q3 2024 alone, insolvencies in England and Wales surged by 27.4% compared to the previous year2. This worrying trend was further intensified by rising interest rates on credit cards and overdrafts, making it increasingly difficult for consumers to manage their debt.

While the overall cost of living stabilised somewhat during the year, it was still elevated compared to pre-pandemic levels. This persistent pressure on household budgets limited consumer spending power and hindered economic recovery. As a result, many consumers struggled to make ends meet, leading to increased reliance on credit and, ultimately, higher levels of debt - changing the customer landscape.

The Property Market - By Sophie Kettle, Commercial Director

While the year began with a continuation of the stagnation experienced in 2023, particularly in high-value areas like London, house prices continued to fall in the South East. 

The new Labour Government's ambitious target of building 1.5 million homes by 2030 is a significant undertaking that requires substantial investment and policy reform. While the need for increased housing supply is undeniable, challenges related to land availability and planning regulations could hinder progress. Despite the government's stated intentions, there has been limited evidence of accelerated housing development in recent years. In fact, the new government is already on track to miss their target by up to 475k homes3.

The departure of the Help-to-Buy scheme in 2023 has resulted in a 21% decrease in first-time buyers this year4. It's clear that a future scheme is required to boost the levels of consumers entering the property ladder, making homes affordable, flexible and sustainable for the future. 

Closing statement

2024 has been a year of significant shifts, challenges and successes for the UK property market. Economic turbulence of the early months to the gradual easing of inflationary pressures and subsequent interest rate adjustments. 

While consumers face ongoing challenges, this year has laid the groundwork for potential progress in 2025. As we look ahead, it’s essential for lenders and mortgage brokers alike to understand these challenges and work together to find solutions for the UK. Capitalising on emerging opportunities. 

Sources

 
1 - Bank of England; https://www.bankofengland.co.uk/monetary-policy/inflation

2 - UK Parliament; https://commonslibrary.parliament.uk/research-briefings/sn02885/#:~:text=Individual%20insolvencies%2C%20England%20and%20Wales,up%206%25%20on%20the%20year.

3 - Inside Housing; https://www.insidehousing.co.uk/news/labour-on-course-to-miss-housing-target-by-up-to-475000-homes-without-more-grant-88880

4 - Finder; https://www.finder.com/uk/mortgages/first-time-buyer-statistics

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