The Bank of England Holds Interest Rate at 5.25%

On February 1, 2024, the Bank of England maintained its benchmark interest rate, known as the Bank Rate, at 5.25% – where it has remained since rising to a fifteen-year high in August. Financial markets and consumers are cautiously optimistic that interest rates may have peaked in the short-term. This raises questions around the Bank of England’s Bank rate and borrowers’ mortgage rates in 2024. It also remains to be seen what effects this may have on property valuations across the nation.

Currently, mortgage rates remain elevated compared to historical norms. Many borrowers will face significantly higher payments when refinancing in 2024.

Rightmove, the online estate agent portal, has projected that mortgage rates will stabilise in 2024 but “remain elevated,” tempering budgets for some buyers, particularly in the lower to middle market segments.

Average home prices have declined modestly by 1-2% over the past year according to major housing indices, each with their own methodology for tracking national prices monthly. Rising financing costs have acted to moderate demand as the market experiences falling prices and properties taking longer to sell.

Most borrowers will see a substantial rise in monthly housing costs as rates have climbed significantly over the past two years. However, with the Bank of England holding rates in December, the mortgage sector may now stabilise. Borrowers needing to refinance early in the new year should find improved terms and pricing compared to six months ago when inflation and interest rates remained ascending with an uncertain outlook.

The United Kingdom Property Market Outlook for 2024

This report examines potential developments in the United Kingdom property market and mortgage rates in 2024. The year 2023 brought volatility, with interest rates and economic indicators fluctuating. Housing prices registered an annual decline for the first time in a decade according to official data, though industry sources note rising demand in recent months. Those planning a real estate transaction seek clarity on 2024’s trajectory.

Recent reports surfaced of a proposed government initiative to assist first-time home buyers, with implications for borrowing accessibility and home valuations. Subject matter experts offer their 2024 forecasts. Sliding money market expectations suggest the Bank of England may lower interest rates as early as spring, coinciding with sub-4% five-year fixed mortgages returning for the first time since May 2023.

At present, borrowers with limited down payments can access considerably improved terms versus several months ago, according to industry analytics. For example, the average two-year fixed rate at 95% loan-to-value stood at 6.21% on December 21, 2023, down from 7.1% in August.

Already more favorable than summer highs, ongoing competition promises further reductions. This should stimulate housing market activity as the year progresses.

Bethany Nicol

Property Manager, Valor Properties