MORTGAGE MATTERS – JULY

Date: July 2024

With a new Labour government and greater political clarity, coupled with the real prospect of Bank of England rate cuts on the horizon, confidence is returning to the housing market.

The landslide victory of the Labour Party promises at least a new period of clarity and political stability, positive news for the housing market. Labour has pledged to build 1.5 million homes in their first five years, equivalent to 300,000 homes annually. Support for ‘Build 300,000 homes a year’ was a top 10 issue for voters (Redfield & Wilton Strategies poll) reflecting a positive shift in sentiment and a more widespread understanding that increased housing supply is crucial for renter and buyer affordability.

Labour’s ambitious plans include reforming planning, building new towns, devolving powers to mayors, and fast-tracking approval for urban brownfield development, all aimed at addressing the housing market crisis (Dataloft a PriceHubble Company, Department of Levelling Up Housing & Communities, June 2024).

Inflation reached its 2.0% target in May (ONS) and an interest rate cut is looking increasingly likely, which should boost the market and give lenders more confidence to lower their mortgage rates. Consensus forecasts suggest that by the end of 2024 the bank rate will be 4.5%, down from the current 5.25% (HM Treasury). As the outlook brightens, consumer confidence increased for the third month in a row in June (GfK Consumer Confidence Tracker). Buyer demand remains higher than last year, with 28% more mortgage approvals in the first five months of the year compared to the same period last year (Bank of England).

With markets now pricing in multiple base rate cuts this year and a number of economists forecasting the first cut next month, a sense of optimism is emerging. Three major lenders have reduced mortgage rates in the last week, and more lenders are expected to follow suit. Halifax and Natwest have cut rates by up to 0.23%, while Clydesdale Bank said its rates will fall by 0.38%. Lenders are advertising the fact they are open to business and are loosening criteria, such as increasing loan-to-values in the new home market. The availability of mortgage deals at 95% loan-to-value rose to 361 in July, its highest point in more than two years (Moneyfacts).