Bank of England Interest Rate Announcement | 14 December 2023

Decision by the Bank of England to hold the base rate at its current level of 5.25% was not a huge surprise.

Although today’s decision was welcome, existing financial pressures mean it will be a bleak winter for some.

The real issue now facing the decision-makers is how this affects the economy as a whole. This, in turn, impacts those of us who have a mortgage, or individuals or businesses with any degree of borrowing.

Higher interest rates and increased cost of living have limited mortgage affordability during 2023, and have pushed some customers into mortgage arrears.

As we have reported several times over the last year, the end of unprecedented low fixed rates has been something of a ticking timebomb and the full impact of this is starting to take hold.

Many homeowners who opted for fixed-term mortgages are now finding themselves more likely to be affected by the higher interest rates as they roll off these onto variable-rate mortgages. The average monthly repayment amount is expected to increase by 39% by the end of 2026.

Interest rate rises are also affecting borrowers with credit cards and personal loans – adding to the cost-of-living pressure. People are being encouraged to spend less, save more, and eventually lower inflation.

The Bank of England forecasts inflation to fall and the government has set a target of 2% by the end of 2025. Many believe that interest rates have peaked and pressures on household finances are starting to ease. Despite this, economic uncertainty continues.

The property market is preparing for another unsettled year in 2024. With reduced confidence and fewer people wanting to buy and sell, there are a plethora of reports telling us that values are falling.

Some say that the fall is low, whilst others say the real effect is much higher. The biggest issue is that it’s not real time data and there is always a significant time lag between reported figures and what is happening in the market.

Given that we are viewing a significant number of properties across the country daily, it is fair to say we have a good handle on what is happening. Naturally, figures vary from area to area but in our view, there has been a definite change since the summer. We would not be at all surprised to see as much as a 10% reduction in values reported across the whole of 2023.

Predictions for 2024

Predictions suggest house prices will continue to fall throughout 2024. We are already seeing that the number of houses coming onto the market is increasing and this will likely continue to be the trend through most of next year.

On the other hand, the demand for rental properties remains strong. But with rents increasing faster than incomes, there is a growing concern that there will not be enough properties to meet demand. And with buy-to-let landlords challenged by both new legislation and increased interest rates, the market is guaranteed to see some changes.

Our view is that 2024 will be a year of uncertainty and change for the housing market. What we have seen through Q4 of this year will be pretty much what we will see through next year. As mentioned, there will be more properties available which will be good news for our clients who do not have a property to sell and in the main can move quickly.

Whatever happens, it is fair to say that there are still some choppy waters to navigate and 2024 will certainly be one of transition.

As ever, time will tell…

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