With its high inflation and 15-year high mortgage rates, the property market for 2023 was interesting to say the very least. However, the opening weeks of the new year do seem to suggest a renewed interest from homebuyers, with the slight caveat that sellers may need to manage their expectations when it comes to the final sale price of their property.
In this article, we’ll explore the wider trends across the UK housing market, while taking a closer look at what this could mean for both homebuyers and sellers in Cheshire.
What is happening in the UK Property Market?
In December 2023 the Bank of England (BOE) announced that it would hold its Base Rate at 5.25% for the third time. Previously The Bank had increased its Base Rate 14 consecutive times in response to rising inflation. This in turn caused a significant increase in mortgage rates, impacting both homeowners and buyers with an overall slowdown in property sales.
During 2023 the BoE had focused its attention on lowering inflation to the Government’s target of 2%. By increasing Base Rates and limiting consumer spending power, it was hoped that inflation would begin to fall after hitting a high of 5.2% in November 2023. By the end of the year, it appeared that The Bank’s plan was beginning to work with inflation falling to 3.9%, which began to translate into lower mortgage rates.
An unexpected rise in inflation from 3.9% to 4% in December 2023 was an unexpected development for many but is currently not expected to be an indication that inflation is set to rise in the same way that it had throughout the rest of the previous year.
Today average mortgage rates are hovering around 5.50%, with research from Moneyfacts showing that on January 4 2024 the average two-year fixed-rate mortgage was 5.87%, while the average fixed-rate mortgage rate was 5.53%. With mortgage rates coming down in this way it currently isn’t uncommon to find mortgage rates below 5% from some lenders, while even mortgages within the 3% percent bracket have begun to appear.
This has been welcome news for homeowners on variable rates who may begin to see their monthly outgoings ease after several increases in mortgage repayments. Lower mortgage rates are also good news for property buyers going into 2024, as there is currently strong competition from lenders to attract new clients with new deals. With the BoE deciding to again hold its Base Rate in February 2024, the early signs are that the housing market will continue to recover throughout the year.
Will House Prices Go Down in 2024?
Besides inflation and mortgage rates, the other metric that is often given as an indicator of the health of the housing market is house prices. Most lenders agree that house prices will fall during 2024, with Lloyds Bank, the UK’s largest lender, expecting house prices to fall by as much as 2.4%.
While this might sound concerning, it is important to consider these figures in the context of historical trends and averages. The current fall in house prices comes after a period of significant growth, so for many the actual value of their property is still more than it was several years ago. It should also be noted that while house prices had continued to grow throughout the 2010s, the Covid pandemic saw a rapid spike in house prices as buyers returned to the market as lockdowns came to an end.
For example, according to Statista average house prices across the UK were £231,940 in January 2021 and £286,489 during April 2023. By December 2023 analysts placed average UK house prices at circa £250,000-£260,000, meaning that for most homeowners the value of their property has increased since they purchased.
Within Chesire for example, information from Rightmove shows that average house prices for 2023 were 2% down compared to the previous year, but 1% up on the peak in 2021 at £254,953.
Further good news comes from Knight Frank, which recently suggested that house prices could increase by 3% during 2024. While this may not be the view of every market expert, most do agree that prices will begin to rise again in 2025, so the worst of trouble facing the property market during 2022 and 2023 does appear to be at an end. What house prices will look like in 2025 after a fall of 1.8% remains to be seen, but for most the property market has proven to be much more resilient than expected.
What is the Current Appetite for Property Sales?
Again, the current appetite for properties from buyers should viewed with historical averages and the events of the pandemic in mind. According to Zoopla, current interest from property buyers is 10-15% higher than pre-pandemic levels, but still lower than 2020-2022 when buyers had surged back to market.
In the same way that low mortgage rates between 2020 and 2022 could be seen as a historic abnormality, the surge in interest during the same period is something of an outlier. When approaching the market with a view of the past 5-10 years, 2024 is looking cautiously optimistic and certainly not as bleak as many had expected.
Buyers are still encouraged by falling mortgage rates, which although not as low as 1-2%, are still much more attractive than they have been in the past 6 months.
However, sellers will need to keep in mind that buyers will be more cautious and especially aware of how much they are willing to borrow. Sellers may find that where buyers might have previously paid the marked price for properties they will now be making offers less than asking price.
Conclusion - Managing Expectations
After a challenging few years of rising inflation, high mortgage rates, and falling house prices, it appears that the UK property market is slowly returning to its historical norms. This is naturally a huge relief for everyone, but it should be remembered that 1-2% of mortgages and buyers offering prices above the asking price for a property are exceptions rather than the rule.
The ‘new normal’ will likely be a return to pre-pandemic demand with house prices following a less rapid pattern of increases. What's more, it could be 12 months before house prices truly begin to rise again - unless experts suggesting an increase of 3% during 2024 are proven right - only time will tell.
In the meantime, demand for property is certainly returning to the market, meaning that there are still returns to be made on property sales, as long as sellers manage their expectations and set their prices accordingly.
“We have seen a busier than expected start to 2024, with higher levels of new instructions and sales that were seen in January 2023. As it appears that interest rates have levelled off this has created an increased level of confidence in buyers and they are actively looking to move in the first three months of the year,” observes Simon Middleton from Meller Braggins. “The market continues to be polarised with sale prices holding firm in the affluent, sought-after locations of South Manchester and Cheshire with their excellent schools and road and rail links as opposed to more rural locations where house prices are more sensitive to seasonal trends.”
Sell Your Home with Meller Braggins
If you are looking to sell your property in Cheshire and the surrounding area, contact Simon or Richard at Meller Braggins for the best advice and boutique service at every step of your sales journey. We’ll provide a professional and experienced service combined with detailed local knowledge and bespoke marketing to ensure that your sale runs smoothly.
Related Links
Meller Braggins Auctions | Property Valuations | Book an Appraisal