October 2024: A Month of Anticipation and Shifting Dynamics in the UK Mortgage Market
October market trends have highlighted a month filled with speculation, anticipation, and significant economic developments. Terms such as budget, inflation, mortgage, and interest rates have dominated discussions, echoing the financial uncertainty last seen during the tumultuous period of Liz Truss’ mini-budget in 2022. This month has been marked by significant changes in the UK’s financial landscape, with substantial implications for both the mortgage market and the wider economy.
Inflation Falls Below Target: A Turning Point?
One of the most noteworthy developments in October has been the continued decline in inflation. For the first time in recent memory, inflation has dipped below the Bank of England’s 2% target, settling at 1.7%. This milestone has far-reaching implications. Lower inflation generally reduces pressure on interest rates, which may signal relief for homeowners, landlords, and potential buyers alike.
As the Bank of England Base Rate meeting on 7 November concluded, attention shifted to the scale of the rate cut. The reduction in the base rate is expected to lower borrowing costs and further energise the housing market.
The Mortgage Market in October: Resilience Amidst Change
While the broader economic environment has been filled with uncertainty, the UK mortgage market has displayed resilience. Despite shifts in inflation and interest rate expectations, activity on the ground has largely continued as usual.
Buy-to-Let Market Sees Renewed Activity
The buy-to-let market remains robust, with landlords actively purchasing properties. Falling borrowing costs have provided encouragement, especially after the high rates of the past 18 months. However, this activity is not without its challenges. Landlords have shown increased concern over regulatory factors, such as the evolving standards for Energy Performance Certificates (EPCs) and changes to no-fault eviction laws.
Innovations from Lenders Supporting the Market
Lenders have demonstrated adaptability in this shifting landscape, visiting brokers and highlighting tailored offerings to attract new business. For instance, one prominent lender in the limited company buy-to-let sector has introduced a new approach to remortgage valuations. Instead of basing valuations solely on the current rent received, they are now factoring in market rent. This adjustment is particularly beneficial for landlords with long-standing tenants paying below-market rates, enhancing their borrowing capacity.
Such innovations have been instrumental in maintaining momentum within the market. At Fowler Smith, application volumes in October 2024 have surged by an impressive 48% compared to October 2023, and by 122% relative to the same month in 2022. This growth highlights the enduring strength of the sector despite broader economic uncertainties.
Shifting House Price Forecasts: A Positive Outlook?
October also brought revised housing market forecasts. Initially, analysts at Savills predicted a 3% decline in UK house prices for 2024. However, this has now been adjusted to a forecasted increase of 2.5%. Supporting this optimistic outlook, Land Registry data shows that annual house prices have already risen by 2.8%.
Such upward trends provide a confidence boost for the market, suggesting resilience even amidst broader economic challenges. Nevertheless, the impact of political changes, particularly the policies introduced by Keir Starmer’s Labour government, remains a key variable. While these policies are still in their infancy, historical precedent suggests that government priorities can shift over time, particularly in response to changing global and domestic conditions.
The Role of Swap Rates in Mortgage Pricing
Another critical factor influencing the mortgage market has been the trajectory of swap rates. These rates, which affect the pricing of fixed-rate mortgages, have experienced a notable decline over the past year. As of 24 October 2024, 5-year swap rates stood at 3.781%, a significant decrease from 4.560% in October 2023.
This reduction in swap rates reflects broader financial market trends, including developments surrounding the US presidential election. Lower swap rates have prompted some lenders to reduce their mortgage rates, with Barclays recently announcing cuts of up to 30 basis points. These changes are likely to encourage more borrowing and sustain momentum in the housing market.
Opportunities in a Changing Landscape: October Market Trends
The old adage that change equals opportunity rings particularly true in the current climate. The economic and political shifts of October 2024, while presenting challenges, also offer new possibilities for growth and investment.
Tailored Advice as a Key to Success
Navigating these changes effectively requires structured, tailored advice from reliable sources. Whether considering a new property purchase, a remortgage, or long-term financial planning, professional guidance will be essential to make informed decisions in this evolving landscape.
Preparing for the Autumn Budget’s Impact
The imminent Autumn budget from the Labour government will undoubtedly play a crucial role in shaping the housing and mortgage sectors. Its implications for interest rates, taxation, and landlord policies will need to be carefully analysed. However, as with any government initiative, its true impact may take time to materialise.
Looking Ahead: What Does the Future Hold?
As October market trends draw to a close, the outlook for the UK mortgage market remains cautiously optimistic. Declining inflation, falling swap rates, and revised house price forecasts suggest a more favourable environment for buyers and landlords. However, uncertainty surrounding political developments and global economic conditions remains a key consideration.
The November Bank of England Base Rate meeting will be a significant moment, potentially setting the tone for the months ahead. Whatever the outcome, staying informed and adaptable will be vital for navigating the opportunities and challenges of this dynamic market.
The coming months promise to be as eventful as October, and while change can be unsettling, it also opens the door to innovation and growth. With the right strategy and support, individuals and businesses alike can thrive in the evolving UK housing landscape.
