[ad_1]
Falling mortgage rates have prompted a forecaster to reverse its forecast for UK house prices to fall in 2024, instead suggesting the average property price could rise by £61,500 over the next five years.
Property company Savills had forecast in November that it expects the average house price to fall by 3% this year as recent increases in the Bank of England’s main interest rate have increased pressure on affordability for prospective buyers.
However, although the prime rate remains at 5.25%, competition between mortgage lenders has since driven down the cost of loans, sparking more activity in the market. As a result, Savills it now expects the average price to rise by 2.5% in 2024 to £292,000.
Although it revised some of its long-term forecasts downwards, the company said it expects growth every year until the end of 2028, when it predicts average prices will have risen by £61,500, or 21.6%, to £346,500 .
The number of homes it expects to change hands this year was also revised upward from 1.01 million to 1.05 million.
Lucian Cook, head of residential research at Savills, said: “The outlook for 2024 has improved since our last [November 2023] forecasts, as mortgage lending costs have eased slightly and are much less volatile. The outlook for economic growth also improved slightly, pointing to relatively modest growth in home prices this year, with more potential over the next few years.
It is widely believed that the bank’s key interest rate has peaked, but while some economists predicted a cut as early as March, policymakers at their last meeting voted to wait to make sure inflation continues to fall, and they are expected to keep rates on hold again when they meet this Thursday.
Cook said a 75 per cent two-year fixed-rate mortgage from Nationwide building society, priced in November at 5.35 per cent, had fallen to 4.84 per cent this month, while a five-year deal had fallen to 4.5 per cent.
These deals are no longer available as Nationwide and several major lenders revalued trades up in recent weeks, but prices are still below November prices.
“The highly competitive nature of the mortgage market means that lenders have been pricing quite aggressively in anticipation of a cut in bank prime rate, causing some recovery in buyer confidence and prices,” Cook said. However, he said rising prices this year will lead to further affordability issues in the future.
In London, where prices are highest, Savills predicts a 14.2% rise in prices over the next five years, while in north-west England and Yorkshire and the Humber, where prices are lower, growth is predicted to be around double that more.
after the promotion of the newsletter
Separate figures from rival estate agent Knight Frank show prices in London’s most expensive postcodes have fallen by 2.6% in the past year.
It said that despite a large proportion of cash buyers, sales in London’s prime central markets were “not immune to the pervasive mood of volatility” caused by swings in mortgage rates.
Tom Bill, head of UK residential research at Knight Frank, said: “The close relationship between the cost of borrowing and demand in recent months has been evident across London. The number of offers made was 14% below the five-year average (excluding 2020) in April, highlighting how demand has weakened.”
[ad_2]
