After a chaotic couple of years, the mortgage market is starting to show some positive signs.

Fixed rates have been trickling down in recent weeks as lenders battle to attract customers, giving buyers and homeowners looking to remortgage their first chance to bag a more competitive deal.

But if you’re planning to purchase a new property, or to remortgage your home, there’s another significant question mark looming over this year: what can we expect from property prices?

Despite expectations that they would fall following a series of increases in the Bank of England base rate, UK house prices ended up increasing by 1.7% across 2023 according to Halifax, with the average property having increased in value by £4,800 in December, compared to the same month a year earlier. It wasn’t a smooth ride to these figures, however.

Kim Kinnaird, director at Halifax Mortgages, says: “Whilst it’s encouraging that we saw growth in the last three months of the year, this was preceded with property price falls for six consecutive months between April and September. The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand.”

In this article, we’ll take a look at what could happen to house prices this year, review what experts are saying, and outline what house price movements could mean for you, whether you’re planning to buy, sell or remortgage.

What will happen to house prices this year?

Unfortunately, without the aid of a crystal ball, it’s impossible for anyone to say for sure whether the average property price will go up or down in 2024, especially as there are a whole host of factors that influence the way prices move.

That said, both government forecasts and lenders seem to agree that average prices will creep down a few percent over the course of the year. High inflation and interest rates have pushed mortgage rates up over the past year and a half, and while rates are slowly starting to ease and inflation is trending downwards, it remains the case that fewer people than usual are buying property at the moment.

Robert Gardner, chief economist at Nationwide, said: “The total number of transactions has been running at around 15% below pre-pandemic levels over the past six months, with those involving a mortgage down even more (around 25%), reflecting the impact of higher borrowing costs.”

“A rapid rebound in activity or house prices in 2024 appears unlikely. House prices are likely to record another small decline (low single digits) or remain broadly flat over the course of 2024.”

A dramatic fall in prices appears unlikely due to a limited number of properties for sale, which means demand remains high. The UK suffers from an acute shortage of housing, with a February 2023 report from Centre for Cities claiming that Britain has a backlog of 4.3 million homes missing from the housing market that were simply never built. However, the number of properties for sale did increase 34% in the year to November for a six-year high and double the numbers during the pandemic.

That said, forecasts from the Office for Budget Responsibility from the end of last year predicted a hefty 5% fall in property prices in 2024, though lenders are more conservative with their estimates.

Kinnaird said: “As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty and buyers and sellers are likely to be naturally cautious when considering making a move.

“Our latest forecast suggests house prices could fall between -2% and -4% during the coming year, although, as with recent years, forecast uncertainty remains high given the current economic climate.”

Some commentators believe prices could increase over the year, with estate agency Knight Frank predicting house prices will rise by 3% across 2024, citing the downward trends in both inflation and interest rates and a pickup in mortgage approvals at the tail end of 2023.

Tom Bill, head of UK residential research at Knight Frank, says: “Mortgage approvals were 10% higher in November than the previous year and we expect a double-digit percentage increase in sales volumes this year compared to 2023”.

Mortgage approvals for purchases rose from 47,900 to 50,100 from October to November according to the Bank of England, though it’s unclear whether this trend will continue across 2024. Property website Rightmove reports experiencing nine out of its ten 10 busiest days ever for people seeking a mortgage agreement in principle on their site since Christmas alone.

It’s worth noting that Knight Frank’s forecast preceded the unexpected rise in December’s inflation rate to 4%, a slight bump up from 3.9% in the year to November. Inflation may turn back around next month and continue its downward trajectory, but this small increase demonstrates that nothing can be predicted with total certainty, and experts have acknowledged that ongoing shipping disruption in the Red Sea could spell further trouble for inflation, with freight costs and oil prices surging as a result.

What should I do if house prices go down this year?

If house prices go down as some lenders anticipate, it’s broadly good news for buyers and bad news for sellers.

Last November saw house sellers forced to accept the biggest discounts in five years on their asking prices, slashing price tags by £18,000 on average in a bid to attract interest. If demand does stay relatively low and prices dip, it could be an ideal time to strike from a buyer’s perspective, provided you can bag a good mortgage deal in the process.

The other side of this is that homeowners looking to sell may find it harder to get the price they’re looking for. A prospective home mover could find a great deal on a new home, but may have to delay or cancel the purchase – or have to offer a considerable discount of their own if they can’t sell their current property to fund the move.

Can I remortgage if my house decreases in value?

There’s nothing stopping you from remortgaging just because your property has gone down in value since you purchased it, though it can make your borrowing costs more expensive.

That’s because a lower property price can push you into a higher loan-to-value (LTV) bracket, which limits the number of remortgage deals you will be eligible for, unless you elect to overpay your existing mortgage to compensate. Put simply, the lower the loan-to-value bracket you fall into, the wider the choice of lower cost remortgage options you’ll have, whereas the higher the amount you need to borrow relative to the property’s value, the lower the number of mortgage options you’ll have access to at competitive rates.

Even if falling prices do push you into a higher loan-to-value band, it’s still a good idea to take a look at your mortgage options and try and grab a new fixed rate deal so that you don’t end up rolling onto your lender’s Standard Variable Rate, which is usually much more expensive than other mortgage rates and likely to massively bump up your monthly payments.

It’s also really important to remember that even if house prices decrease over the next 12 months, this doesn’t mean that your house has gone down in value overall. If, for example, you purchased your house five years ago, it will almost certainly have increased in value between then and now thanks to the boom in property prices over the last few years, and even a 4% or 5% decrease in average prices over the next 12 months is unlikely to offset this.

In the event that the value of your property falls below the amount you have left to pay on your mortgage, you’d end up in a position of what’s known as negative equity, and be unable to remortgage at all. According to the government’s Moneyhelper website, it’s estimated that there are currently around half a million properties in negative equity in the UK, although some areas are affected more than others.

What should I do if house prices go up this year?

If house prices increase again year-on-year, for example because demand increases, then sellers may have a better chance of selling their homes at a higher price. Buyers, of course, would get the short end of the stick here. Property is already in short supply, so prices creeping even higher could put the dream of a new home further out of reach for many people, particularly when combined with other factors such as steep rents, high inflation and interest rates, and strict affordability criteria.

Can I remortgage if my house increases in value?

As you might expect, while falling property prices put remortgage customers in a weaker position, the opposite is also true: should the value of your property increase, you should be able to access better deals when you come to remortgage, as you’ll own a greater proportion of equity in your home.

If you’re worried about house prices going down over the next 12 months and are coming to the end of your mortgage deal, then now could be the perfect time to start looking for a new mortgage deal. Read our article Five good reasons to remortgage right now to learn more.

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