Many households had a difficult financial year in 2023. The economic turmoil and rising costs of living placed severe financial pressure on many households. We’ve seen, despite this, that homeowners in 2023 were more resilient than expected and were able to absorb higher mortgage payments when interest rates rose.
As we enter 2024, the consumer is feeling uneasy. Interest rates are high, real incomes are low, and there is a narrative of inflation, war and geopolitical unrest.
Housing market impacts on the short term
- The impact of inflation on purchasing power
Inflation remains higher than the Bank of England target of 2%, despite recent inflation highs that have now subsided. This will continue to affect the amount of money available to consumers in the short term. It is unlikely that the housing markets will return to the high levels of activity seen in 2021 and 2022, which were attributed to the COVID-19 race for space and the stamp duty reductions that boosted the housing market during those years.
Both the squeeze on cash available and the uncertainty consumers face will likely both moderate the current price that potential homebuyers would be willing to pay for a property. The housing market will shrink in 2024.
- Mortgage rates
Even though there are signs that mortgage rates have dropped, they are still higher than the low rates that many people are used to. In the past two years, rates were around 2-3% with some even dropping below 1%. But for those who are remortgaging, they will likely be between 4% and 4.5 %. We can expect people to try to manage their payments through longer-term mortgages. This trend is expected to continue through 2024. For advice from Stroud Estate Agents, contact www.tgres.co.uk/office-locations/stonehouse-estate-agents-stroud/
What will 2024 look like to first-time buyers?
First time home buyers have lowered their expectations. 61% are willing to relocate to another part of the country to buy their first house, and 46% will consider homes that are up to 25% smaller than they would like.
First time buyers will be able to afford more if house prices drop and wages are higher than inflation. According to data, we don’t expect to see a decline in the number of first-time buyers between 2023 and 2024.
Both the Government and opposition will have an impact on the election of 2024, as both parties are committed to increasing access to home ownership. The housing market is likely to be a major battleground in the lead up to the elections.