Raffle House
The changing dynamics in the mortgage market, marked by a competitive pricing war, have contributed significantly to the recalibration of house price forecasts. Raffle House

UK house prices are poised to defy earlier predictions of a decline in 2024 as mortgage pricing competition and Bank of England interest rate reductions reinvigorate the property market.

Following a year marked by continuous price decreases in 2023, the forecast for UK house prices now anticipates a 3 per cent increase in 2024. This adjustment comes in contrast to their earlier projection of a 4 per cent decline.

In the context of diminishing inflation and mounting expectations of interest rate cuts by the Bank of England, the recent upswing in mortgage approvals is anticipated to translate into a noteworthy 10 per cent or more uptick in property transactions throughout the year.

Asking prices for new sellers experienced an average increase of 1.3 per cent, equivalent to £4,571, between December and January.

This surge represents the most substantial rise for this time of the year since before the onset of the pandemic.

The changing dynamics in the mortgage market, marked by a competitive pricing war, have contributed significantly to the recalibration of house price forecasts.

This, coupled with the widespread anticipation of interest rate cuts by the Bank of England, has injected newfound optimism into the property sector, prompting a revision of earlier projections.

The expected rise in property transactions is viewed as a tangible outcome of the increased mortgage approvals witnessed in recent months.

Economists and property experts attribute this positive outlook to a combination of factors, including sustained economic resilience, low interest rates and a gradual recovery from the impacts of the COVID-19 pandemic.

The forecasted growth is expected to benefit homeowners looking to capitalise on the appreciation of their properties and create opportunities for those entering the market.

Amidst the ongoing challenges posed by the pandemic, the UK housing market has displayed remarkable resilience.

Earlier forecasts from banks, building societies and estate agents uniformly projected a decline in house prices for 2024.

However, a series of unforeseen monthly increases over the past three months, coupled with a more substantial than anticipated drop in the official UK inflation rate, has prompted a reevaluation of these predictions.

The government's initiatives, such as the extension of the stamp duty holiday and various support schemes, have played a pivotal role in stabilising the sector and fostering confidence among buyers.

Additionally, the low-interest rate environment, a key feature of the post-pandemic economic strategy, has incentivised property investment.

While political analysts suggest that this could be advantageous for Rishi Sunak in an election year, millions of homeowners are still anticipated to confront a significant surge in monthly mortgage repayments as they approach the conclusion of more affordable deals.

Critics of Sunak have labelled this scenario a "Tory mortgage timebomb", foreseeing that up to 1.5 million households will conclude their cheaper deals in 2024.

This could result in an annual increase in housing costs of approximately £1,800 for a typical family.

The geographical variations in property markets across the UK are also worth noting.

While metropolitan areas and regions with strong economic growth are expected to drive the overall increase, there may be variances in the extent of price appreciation in different parts of the country.

Local factors, such as employment opportunities, infrastructure development and regional economic performance, will likely influence the regional disparities in house price growth.

In its report, global property consultancy Knight Frank said: "The ongoing conflict in the Red Sea and the potential threat it poses for higher UK inflation is another looming risk."

This acknowledgement underscores the complex interplay of geopolitical events and global economic factors that can influence the domestic financial landscape.

While challenges persist, the overall sentiment remains positive, reflecting the resilience and adaptability of the property market in the face of evolving circumstances.