Last year’s mortgage market volatility was unprecedented, to say the least.
We saw ongoing interest-rate rises, consecutive base-rate increases, and a huge (and often contentious) public discussion about what could be the most extensive legislation changes the sector had ever seen, by way of the Renters (Reform) Bill.
Speaking with industry peers and my landlord clients, it’s fair to say we’re all happy to put 2023 behind us. And, what’s more, this upcoming year shows a much brighter outlook for the property market.
Outlook for mortgage rates
Confidence has returned to the UK money markets. The Bank of England has held the base rate stable at 5.25% for the past three meetings, and experts predict the first decrease will be as early as summer this year.
Landlords — take advantage of lower prices
We expect at least two, potentially three, base-rate decreases in 2024 alone, with the rate down to 4.5% by December.
Overall, swap rates have been on a downward trajectory; at the time of writing, two-year swaps sit around 4.25% and five-year swaps at 3.69%.
Higher-than-expected inflation in December and ongoing geopolitical unrest did unsettle the markets in early January, but we expect more stability here than there was last year.
Mortgage product pricing has edged down in line with swaps, with many lenders offering rate reductions to price themselves more competitively. However, with ongoing, albeit slight, movement in swap rates, we’re not expecting significant reductions as lenders maintain profit margins.
Although 2024 has a positive outlook for the mortgage market, several political factors could impact the sector
So, for those clients who held out last year in the hope of significant decreases in mortgage pricing, my message is: it won’t get much better than this, so start exploring your options before you find you’re overpaying on your lender’s standard variable rate!
Property price predictions
Rising mortgage interest rates, tightened buyer appetite and the wider cost-of-living crisis stripped back purchase activity in 2023, resulting in an annual house-price drop of 2%. While a drop is never ideal, it’s worth remembering that many predicted far worse outcomes, at 10%-20%!
While mortgage interest rates continue to make affordability challenging for borrowers, purchase activity will remain muted. Consequently, no one is predicting significant increases in property prices this year. Halifax expects we will see a further decline in house prices, by 2% to 4%, but Nationwide has a slightly more optimistic outlook of unchanged growth.
It is essential, now more than ever, to stay informed on the latest legislative news as we move through the year
That said, it’s still very much a buyers’ market, with Zoopla reporting that the average seller now offers a typical discount of around 5% on the asking price.
For landlords looking for their next property investment, now is the time to take advantage of lower prices. After all, property investment is a long game.
Will rents continue to rise?
Despite the stock of homes available to rent being up 20% year on year, rental supply is still a staggering 30% below average for the time of year, Zoopla reports.
It’s a great time for landlords to consider their next investment and boost their existing portfolio
As a result, the ongoing supply-and-demand imbalance means landlords will continue to benefit from higher rental yields to cover their rising costs, and it offers more opportunities for growing property portfolios.
Political backdrop
Although 2024 has a positive outlook for the mortgage market, several political factors could impact the sector, although we can’t be sure to what extent just yet.
The general election could significantly affect the private rental sector (PRS). Current opinion polls suggest we’ll see a Labour government by the end of the year, which undoubtedly will be quick to pass its Private Renters’ Charter if the Conservatives’ Renters (Reform) Bill has not been passed before then.
Although these bills are very similar, there are some notable differences for landlords to be aware of. Therefore it is essential, now more than ever, to stay informed on the latest legislative news as we move through the year.
Start exploring your options before you find you’re overpaying on your lender’s standard variable rate!
Given the brighter outlook for the PRS, it’s a great time for landlords to consider their next investment and boost their existing portfolio.
As always, keeping up to date with legislative changes will be vital but, with interest rates to remain lower than last year, property prices stable and rents still rising, I’m pleased to say 2024 is set to be an excellent year for landlords.
Jeni Browne is sales director of Mortgage Finance Brokers (formerly Mortgages for Business)
This article featured in the February 2024 edition of MS.
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