May 2024 will be remembered for two big economic and political announcements – headline inflation falling and the surprise general election announcement. In contrast, it was a relatively quiet month for the housing and mortgage markets. But, sometimes no news is good news. Here’s what happened with house prices, mortgage approval numbers and, of course, the base rate.

 

Base rate now expected to stay at 5.25% through summer

Headline inflation fell from 3.2% to 2.3% in May, narrowly missing a target of 2.1%. While there’s not much in it, this might give the Bank of England ammunition to hold the base rate at 5.25% again at their next meeting in June. A June cut is also unlikely on the grounds that it might seem political, ahead of the July election. 

This would mark the seventh month in a row without an interest rate change, and the next opportunity for the Bank to cut the rate would be August, which City analysts are predicting as unlikely. These chances aren’t helped by underlying inflation numbers, which reveal that inflation for services is still high at around 6%, suggesting that high interest rates have been better at controlling inflation for goods.¹

Despite this, swap rates have been falling over the last few weeks, and so have mortgage interest rates. High street lenders recently announced cuts to two, three and five-year fixed-rate deals, reversing the trend of recent price increases. Hopefully, this sets off a domino effect, as other lenders look to compete and drum up business in the quieter market.

So, if you’re ready to apply for a mortgage, it’s worth looking into available rates to get your home-buying plans underway. Moneybox mortgage brokers can secure the right mortgage for you, as they compare thousands of deals that update daily, from over 90 lenders. Tap the button below to book an appointment with a Moneybox broker.

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House prices continue to edge up

Stability is returning to the housing market, as buyers and sellers adjust to the end of ultra-low interest rates and confidence returns. We’ve seen some slight upward movement in the numbers this month, with March’s UK House Price Index showing that average prices were up 0.7% in March compared to February.² Remember, there’s a two-month lag on this data as it includes Land Registry data for all property transactions in the UK, but that also makes it the most complete picture of housing market activity.

Other house price indices, though less comprehensive, are reporting even less of a change. Zoopla’s May House Price Index, which includes data for properties advertised on their platform, reported that property prices remained the same month-on-month.³ Halifax reported a 0.1% month-on-month increase for the same period, for transactions involving their mortgages.⁴

In this time of higher interest rates and increasing house prices, first-buyers are becoming more creative with their home-buying plans. Where their focus used to be on securing an affordable mortgage that could be paid off before retirement, some are now considering longer-term mortgages, such as 30-year or 35-year mortgages. Many are ensuring that their mortgage repayments are affordable in the short term, but are also making plans to overpay and reduce their overall term once rates fall. We’re also seeing an increased number of first-time buyers choosing renovation projects, or moving slightly further afield to achieve their goals. There are always options available!

 

Mortgage approvals decrease slightly 

We saw very little movement in mortgage approval numbers this month, with a slight decrease from 61,330 in March to 61,140 in April.⁵ This levelling out suggests the market is gradually stabilising at ‘normal’ levels (the monthly average over the last decade has been around 65,000).

We’ve seen a more positive story within our own customer base, with a 44% year-on-year increase in mortgage applications through Moneybox Mortgages. It’s been great to be able to help so many customers to achieve their home-buying dreams and navigate this challenging time in recent market history. Could you be next?

 

¹ Source: Office of National Statistics (ONS) CPI Annual Rate of Inflation

² Source: GOV.UK Land Registry (UK House Price Index for March 2024)

³ Source: Zoopla House Price Index, April 2024

Source: Halifax House Price Index, April 2024

Source: Trading Economics, UK Mortgage Approvals for April 2024