What’s next for the housing market in 2024?

Our housing expert Andrew Asaam explores what homeowners and renters might see in the market this year.

2023 was a financially difficult year for many. Economic turbulence and the rising cost of living put severe pressure on many household’s finances. Despite this we’ve seen that, on the whole, homeowners were more resilient in 2023 than was probably expected, and have been able to absorb increased mortgage payments as interest rates increased. 

However as we begin 2024, consumers are feeling uncertain. Inflation, war, and geopolitical uncertainty dominate the narrative, while interest rates remain high and real incomes remain low. 

How might all this impact the property market this year; we look at the forecast for 2024 as well as how different parts of the market, such as first-time buyers, renters and housebuilders might be affected. 

Short term impacts to the housing market

1. Inflationary pressure impacting purchasing power

Despite the recent highs in inflation that are now subsiding, inflation remains above the Bank of England's target of 2% and in the near term will continue to impact the amount of money consumers have to spend. As a result of this, it’s unlikely the housing market will be returning to the unprecedented levels of activity that we saw in 2021 and 2022, categorised by the race for space that came from COVID-19, and by the stamp duty cuts which helped boost the housing market in those years.

The squeeze on available cash and uncertainty that consumers are facing will both likely moderate the price potential homebuyers are willing to pay for a property at the moment. This will result in a smaller housing market in 2024, and we expect house prices to fall between 2% and 4% this year.

2. Mortgage rates

Despite indications that mortgage rates are past their peak and that rates are reducing, they're still up from the low levels that people had become used to. Two years ago, we saw rates sit around 2-3%, with some even dipping under 1%, but for those remortgaging in the coming year, that will more likely be around 4% and 4.5%. As a result of this, we can expect to see people trying to manage their repayments through longer term mortgages, so we assume we’ll see that trend continuing through 2024.  

We still offer the Mortgage Charter to help support customers facing financial difficulty with a range of payment options. These include extending the mortgage term or making interest only payments for six months, as well as switching to a new mortgage deal six months in advance. 

What does 2024 look like for first time buyers? 

Many prospective first time buyers are now moderating their expectations, with 61% now prepared to move to a different part of the country in order to purchase their first home, while 46% are now willing to consider homes up to a quarter smaller than their ideal size. 

If house prices fall and wages outpace inflation then affordability will improve for first time buyers. Our data indicates that we’re unlikely to see first time buyer numbers decline in 2024 compared to 2023.

The election in 2024 will also have an impact with both Government and opposition parties demonstrating a commitment to increase access to home ownership. Housing is going to be a key battleground, so this may cause some uncertainty in the market in the run up to the election.

We also expect to see an increase in demand of shared ownership properties in 2024 as first-time buyer affordability remains challenged and people who want to own a home exploring alternative means to get onto the property ladder. However, we need to be mindful that an increase in demand for shared ownership homes doesn't necessarily equate to an increased supply. 

Is buying a house still worth it? 

There are still many advantages to owning a home, and it remains many people's aspiration. Home ownership can offer long term financial and living stability, however, different home setups will work for different people and different life circumstances. The most important thing to do is meet housing needs and to create a secure home environment.

For that reason, we’re committed to contributing to a UK in which all households have access to affordable, safe and sustainable homes in places they want to live. Given the uncertainty that we’ve experienced over the last few years, one thing’s for sure - 2024 is unlikely to turn out as expected. 

This article was originally published in February 2024.