With inflation falling, and competition in the lending markets seeming to bring much-needed stability to the pricing of fixed-rate mortgages, a number of lead housing market indicators turned positive in the first four months of 2024. We’ve therefore taken the opportunity to review our outlook for mainstream house prices.

We are now pencilling in low single digit house price growth this year, rather than the low single digit falls we were expecting back in November – you can read more on that here.

We’ve done so in the knowledge that demand and supply in the housing market are likely to ebb and flow over the remainder of this year, in line with changing expectations for the pace and scale of interest rate cuts.

A more positive outlook

Mortgage approvals have continued to pick up, rising from 60,500 in February to 61,300 in March according to the Bank of England. And levels of market activity were 20% higher in April 2024 compared to a year previous, and 9% above their pre-pandemic norm for the month.

However, on the back of two consecutive months of weaker data, levels of annual house price growth in the mainstream market have slowed, according to the Nationwide (standing at just 0.6% in the 12 months to the end of April). It would also appear that we haven’t yet fully seen the back of fluctuations in the cost of mortgage debt.

With concerns over the stickiness of inflation on both sides of the pond, fixed rate mortgage costs have been increased by most major lenders over the past 10 days or so. For example, the Nationwide increased their headline quoted rate for a 2-year fixed rate mortgage at a 75% LTV from 4.69% to 4.84% (subject to a standard product fee). But given that it remains a case of when, not if, Bank base rate is first reduced in 2024, this is unlikely to signal a return to the levels of volatility in the pricing of mortgages that we saw last year.

As a reminder, for updates on the prime markets you can consult our short-form quarterly market updates or immerse yourself in our half yearly Prime UK Residential Report. You can find both here, covering the top end of the sales and rental markets.

The rental market

While we have seen a slowing in annual rates of rental growth in the prime markets, the Homelet index showed a slight increase in rental growth across the wider market in April, which we’ll be monitoring with interest over coming months.

Meanwhile, we have finally seen progress on the Renters (Reform) Bill. This will bring an end to the Assured Shorthold Tenancy Agreement in England and Wales – but only once the necessary machinery is in place to ensure future legal proceedings can be handled effectively. That has now passed through the House of Commons and awaits its second reading in the House of Lords, at a time when speculation rises over the date of a possible general election. 

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Articles from across Savills

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