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Interest Rates Below 4%: Autumn Posed for Boosted Buying Activity
We are finally seeing mortgage rates below 4%, the most affordable deals since Spring 2023. In our overview of the latest news, we explore what to expect from the UK housing market in the coming months.
Written by: Luka Ball
Mortgage rates in the UK have fallen, with the average five-year fixed rate now at 4.80%, down from a peak of 5.82% a year ago. This decline offers some relief to buyers and homeowners, though rates remain significantly higher than pre-pandemic levels. The Bank of England's decision to ease its base rate in August, following 14 consecutive hikes, has helped slow the growth of household rent and mortgage payments to their lowest in 17 months.
Despite mortgage rates still being elevated by historical standards, the housing market is showing signs of recovery. Increased buyer activity and improved market sentiment have fuelled optimism, though affordability remains a significant challenge for many. Experts caution that while activity has picked up, sellers should not overestimate demand as buyers continue to face financial constraints.
There is growing optimism that mortgage rates will continue to fall as inflationary pressures ease and economic conditions stabilise. A major lender recently announced rate reductions of up to 0.66 percentage points for buy-to-let landlords and large mortgage holders. Home movers and first-time buyers also benefit, with two-year fixed mortgages dropping by up to 0.2 percentage points and five-year fixes by 0.15 percentage points.
Five-year fixes can now be found as low as 3.77% at 60% loan-to-value. For those with a 25% deposit, rates as low as 4.32% are available, while buy-to-let investors with energy-efficient properties can secure rates as low as 4.22%. These reductions are expected to make homeownership and property investment more attainable.
However, with 78% of mortgage holders locked into fixed-rate deals, only a small proportion of consumers will feel the immediate benefits. Many first-time buyers proceed cautiously, opting for larger deposits or lower-priced properties to offset potentially higher monthly payments.
Latest News in the UK Housing Market
Confidence in the UK housing market is growing, with 70% of consumers expressing positivity about their household finances, the highest since April. Confidence in the housing sector has also risen from 25% to 29%, though challenges persist, especially for younger homeowners. Only 14% of those aged 18-34 are considering selling, with many preferring to retrofit homes for energy efficiency rather than move.
While transaction volumes remain 20% lower than pre-pandemic levels, the number of sales agreed upon between buyers and sellers has increased by 16% compared to last year. Sellers are still accepting lower offers, with homes achieving an average of 96.6% of the asking price, down from 99.4% in 2022. London, in particular, has seen sellers accepting lower bids to close deals.
Where Are the Most Affordable Places in the UK to Buy a Home?
With mortgage rates at a 15-year high, it's not the easiest time to buy property, for first time buyers and investors alike. Regulations have gotten stricter since 2022, and high mortgage rates have thinned profit margins, making owning a standard buy to let a trickier affair than a decade ago.
However, this isn't the case everywhere in the UK. The North of England has seen entirely different purchasing behaviour to the South since the early 2000s. In select areas, particularly Yorkshire, North Lincolnshire and Durham, you can still easily buy a property for under £100,000.
While house prices have dropped slightly due to lack of affordability across London and the rest of the South, this isn't the case in other regions.
Due to affordable housing and cheaper living costs in these areas, most of Northern England and Scotland have been resistant to the housing slump that the rest of the UK has experienced in response to high mortgage rates. The property market in these regions has remained robust and has seen growth throughout 2024.
There's certainly hope, both for property investors and those looking to get on the housing ladder. If you're looking to invest in a buy to let in 2024, it may be worth looking in affordable areas with a consistent rental demand, such as university towns or areas close to large employers. Property hotspots like these are still reaping generous rental yields, while the rest of the country is seeing slow growth.
What Does Our Expert Say?
George Abouzolof
Senior Finance Broker CeMAP
Inflation has dropped below 2%, which isn’t favourable news for the UK’s economic growth. The 2% target strikes a fine balance between avoiding high levels of inflation while maintaining healthy GDP growth.
2% inflation per year is typically an indicator of a healthy economy, so it’s likely that there will be further reductions from the Bank of England to stimulate market movement. If this goes ahead, there will consequently be more affordable mortgage rates in the coming months.
There’s also a level of concern regarding rental yields, less attractive stamp duty and BTL legislation which could see a further number of landlords selling up. This could free up a number of starter homes for those waiting to get on the property ladder, but it may also put pressure on already competitive rental market.
Outlook for the Remainder of 2024
As autumn approaches, experts forecast modest house price increases, followed by the usual seasonal slowdown toward year-end. The market's trajectory will depend on key economic developments, including the Bank of England’s next interest rate decision and the outcomes of October’s budget.
While transaction levels are recovering and mortgage rates continue to fall, affordability remains critical. Rising rents and mortgage payments are consuming a larger share of household income, particularly outside regions such as the North West, Scotland, and Northern Ireland. This narrowing gap between renting and buying influences the decisions of many first-time buyers, who opt to save for larger deposits or purchase more affordable homes.
Need a refresher on how much you can borrow? Use our mortgage calculator below:
How Can You Find an Affordable Mortgage in 2024?
Despite current optimism about declining mortgage rates, deciding on the best option can be daunting and confusing.
We can help you compare mortgage products and their cost to find the best deal based on your specific situation from a wide range of lenders nationwide.
Related: What is a professional mortgage and can you get one?
Expert mortgage advisors have their finger on the pulse of the latest mortgage market news. Whether you're a first-time buyer or looking to refinance or invest in a BTL, we can help you understand your mortgage options so you feel confident you're making the right choice.
To see what we can do for you, give us a call at 0203 900 4322 or book a free consultation below.
