In order to consider what is in store for the UK housing market in 2024, you first have to understand where the ups and downs in the mortgage markets and regulatory intervention have left us at the end of 2023.
Frustrated first-time buyers, cash-strapped private renters, smaller-scale investors and anyone having to re-mortgage would have been able to make a plausible case that the market was stacked against them in 2023.
Much higher mortgage costs made home ownership less attainable and caused many existing homeowners coming to the end of their fixed rate to undertake a root and branch review of their household finances.
Balancing the books in 2023
It also became substantially more difficult for buy-to-let investors make the sums add up.
The true impact of measures such as the tax relief on mortgage interest came sharply into focus in the higher interest rate environment.
And while plans to tighten minimum energy efficiency standards were kicked into the long grass, the government pressed forward with plans to bring to an end the assured shorthold tenancy.
These issues combined resulted in a fall in the number of homes available to rent, which had a knock-on effect on rental growth, which now looks to end the year close in double digit territory.
Price falls contained
Yet the house price falls recorded by the likes of Nationwide, Halifax and the Office for National Statistics have been relatively modest.
Yes, mortgage approvals for house purchases have fallen as mortgaged homeowners have looked to batten down the hatches. But total activity levels have been less affected as cash buyers, more readily able to take a medium-term view on the market, have sensed an opportunity.
Perhaps more importantly, while the level of unsold stock has risen, there is still not a deluge of homes for sale. And so we have not seen the kind of imbalance between supply and demand that were features of the market in the early 1990s or in the wake of the great financial crash.
Mortgage market changes
In this respect, the shift towards longer-term fixed rate mortgages in the run-up to recent events has insulated the market. So too has the mortgage regulation introduced in 2016, which saw borrowers' affordability stress-tested to account for an increase in interest rates.
As a result, where borrowers have come to an end of their fixed rate mortgage, it has more often been financially uncomfortable than wholly unmanageable.
And where homeowners have faced financial difficulties, options have been laid out to extend their mortgage term or go interest-only for a period.
Are we out of the woods yet?
Now headline rates of inflation have started to fall in a meaningful manner, the bank base rate has reached a plateau and much needed stability has returned to the mortgage market.
Furthermore, both the Nationwide and Halifax house price indices have recently returned to monthly house price growth.
But even if we have past peak pain in the housing market, that does not mean we are quite out of the woods yet.
