UK house prices remain on track to edge higher this year as a mortgage pricing war and expectations of another Bank of England interest rate cut in the final quarter of the year ignite the property market.
After a challenging year in 2023, forecasts for UK house prices in May look set to rise by 3% in 2024, up from an earlier estimate of a 4% drop.
Against a backdrop of falling inflation and growing anticipation of interest rate cuts, an expected increase in transactions seems a likely outcome.
In the last three months, there has been a general election and a rate cut, and this is helping to support confidence in the housing market.
The first Labour government in 14 years and the first rate cut since March 2020 have clearly changed the mood music. The mainstream sales market has been impacted by the rate cut more than the change of government.
Following the drop to 5% from 5.25% and lower-than-expected inflation data, SONIA five-year swap rates fell towards 3.5% in August. Financial markets were pricing in a further cut in November.
It will lead to a meaningful increase in the number of lenders offering sub-4% mortgages this autumn. As a result, demand and sales volumes will be stronger in the final months of this year than in 2023.
Nationwide also showed growth of 1.6% in Greater London in the year to June, which means prices in the capital are fast-approaching 2% for 2024.
