After the past two years where consumers have been hit in their pockets at every turn, I am hopeful that 2024 will be a more stable and affordable year for everyone.
And we’re starting from a good base. The decision from the MPC’s last three meetings not to change the Bank Rate has been a welcome relief from the 14 consecutive rises which saw the rate increase from an unprecedently low 0.1% to 5.25%. I’m not going to do the maths on the percentage increase, but it’s a whoopingly big number! I don’t expect there will be much movement on this rate this year, I’m quietly optimistic that it has peaked, and that there may be a small cut, maybe just a quarter point, towards the end of the year.
The markets seem expectant of a bigger drop, potentially ending the year at around 4.5%, and this is coming through in mortgage rates where 5 year deals have been nudging below the 2 year rates.
Despite these positive glimmers, I expect the mortgage market will remain challenging and overall lending will still be lower than the pre-pandemic levels. This should be good news for borrowers, as a competitive market is likely to lead lenders to shave margins to achieve growth. However, in real terms, although rates are coming down they are still considerably higher than where they have generally been for the last decade.
Only around half of the borrowers who were on a fixed rate before December 2021 when the Bank Rate started its climb, have come to the end of that deal and re-mortgaged on to a, presumably, much higher rate. This means there are still around 5 million households who due to come off their fixed rate by 2026 and should therefore be preparing for a significant increase in their mortgage payments. Whilst it was reassuring that in our December Property Tracker report the majority (85%) of borrowers say they are confident that they can maintain their mortgage payments, lenders remain alert to those who may experience difficulties and will continue to offer practical, tailored support.
The inflation rate also looked far more attractive at the end of 2023 (4.7%) than it did at the start (10.1%). Whilst halving the rate is great news, let’s not be sanguine about it, it still means that consumer costs are continuing to rise at a rate that is double the 2% target. At any other time we would have been very vocal about the need for inflation to be reduced, so whilst celebrating the fall we must continue to focus on the target.
Of course, the big unknown for 2024 is the General Election – other than we know that we will have one (I know technically it could be January 2025, but I don’t think anyone expects that). This is the potential fly in the ointment that might scupper my vision of a boring year. As soon as the button is pressed on the date the potential for disruption is high. We have some idea of what Labour housing priorities are, including first-time buyers and greener homes. The Conservative policies are less clear, but extending the Mortgage Guarantee Scheme at the end of last year is an indication that first-time buyers are high on their agenda.
What we don’t need is any posturing or stunts in an attempt to win over voters in the lead up to the election. So no veiled incentives such as Stamp Duty holiday announcements please, they would only serve to cause short-term disruption for no long-term gain.
There has been so much turbulence since the last General Election, let’s do all we can to ensure 2024 is a predictable, affordable – and yes boring – year for all.
This article was first published in Mortgage Finance Gazette