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    Current Housing Market in the UK

    The rise of mortgage rates this summer to combat inflation greatly impacted housing demand. Due to affordability concerns, the number of completed home moves during 2023 will be 23% lower than in 2022. However, with supply catching up, house prices decreasing, and income growing, the outlook for the UK’s property market may be positive.

    • -1.1%

      Current Avg. House Price Inflation (2023)
    • 5%

      Current Avg. Mortgage Rate (2023)
    • 1 million

      Projected Total Sales (2023)

    UK House Prices and Trends in 2023

    The current UK housing market has seen house price inflation slow from +9.6% to -1.1% in just a year. Despite a 20% reduction in buying power, this sudden slowdown in house prices has been modest.

    Six months ago, 1 in 20 housing markets in the UK were registering annual price falls. Fast forward to today, it is now 4 in 5. None are currently noting price falls above 5%. However, this will likely change in the coming months as housing markets adjust to weaker buying power.

    The South has been leading the country with the highest house price reductions, especially London’s commuter areas. These are reporting the largest annual price falls, some seeing reductions of 3.5% from last year. However, falls in house prices are spreading further. 80% of housing markets in the UK record YoY price decreases as it extends across the country.

    While house prices have been falling, they have been falling far less than the ultimate housing market predictions for 2023. Zoopla’s forecasts have particularly been, and continue to be, close. With just two months left in 2023, their estimations of 1 million transactions and price falls of ‘up to 5%’ are accurate.

    Mortgage Rates in 2023

    A rebound in demand came to the market in the first half of 2023 as mortgage rates fell to nearly 4%. However, with rates rising suddenly over the summer, demand has deflated once again. In fact, as of October, demand was a fifth below last year and a full 25% lower than the 5-year average.

    Even with house price falls, current mortgage rates at 5% and above still make housing expensive for most buyers.

    Mortgage affordability testing has been tougher since 2015. Even if new buyers were paying 2% mortgage repayments, banks still wanted proof that they could afford 7% mortgage rates. This is in place to ensure borrowers can afford higher rates when they come to re-mortgage their property. However, in our current housing market, with 5% rates, lenders are stress-testing rates of 8-9%. This is aiding the reduction of buyer demand but has built resilience.

    Next year, mortgage rates are likely to drop to 4.5% and household incomes will steadily increase to repair affordability. This will surely help to steady the market and increase buyer demand.

    Buyers and Demand in 2023

    Zoopla’s housing market predictions for 2023 have so far been accurate. Completed home moves are 23% less than in 2022. These 1 million transactions are on par with Zoopla’s previous UK property market outlook for this year. Even if mortgage rates lessen alongside house prices in 2024, Zoopla still predicts a similar number of transactions from this year. This is mainly due to the next General Election, where a pause in housing market activity is likely. However, if mortgage rates do move more quickly toward 4%, more sales may be on the horizon for 2024.

    The combination of higher mortgage rates and the cost of living this year account for why the number of home moves is so below the 50-year average of 1.26 million. Buyer demand has dropped dramatically. Many potential buyers are delaying moves, either to wait for lower mortgage rates or simply finding the current 5%+ rates too unaffordable.

    First-time buyers (FTBs) remain the largest buyer group despite sharing less in sales from previous years. 2 in 3 sales in 2023 have been FTBs. Increasing rent is the main cause of this. Even with mortgage rates at 5.5%, some housing markets in the UK offer more affordable options to current rental costs. Especially as rent continues to increase over the next few years, FTB demand will remain.

    FTBs may look to hold the top spot for the largest buyer group in 2023, but cash buyers are a close second. For the last five years, 1 in 5 sales were cash buyers. As of this year, cash buyers have accounted for 1 in 3. People who could afford to have paid for properties upfront to avoid mortgage rates. Cash buyers make up a total of 32% of sales in the current housing market.

    Housing Market Predictions for 2024

    With property prices reducing less than predicted, alongside average mortgage rates of 5%, the UK’s current housing market will remain relatively expensive at the end of 2023. But what is the outlook for the UK property market, and how will this compare to house prices in 2024?

    • -2.0%

      Projected Avg. House Price Inflation (2024)
    • 4.5%

      Projected Avg. Mortgage Rate (2024)
    • 1 million

      Projected Total Sales (2024)

    Forecast for House Prices in 2024

    Will House Prices Go Down in 2024?

    Zoopla predicts house prices in 2024 to fall by 2% as part of their outlook for the UK’s property market. However, this will not be a quick transition. With the number of properties up for sale at a 5-year high, house prices in 2024 will need to be priced competitively. Sellers will likely price their properties lower to be more desirable.

    Growing household incomes will aid affordability but may cause homes to be slightly overvalued by the end of 2024. However, borrowers taking longer mortgages will counterbalance this.

    The outlook for the UK property market is positive. Overall, house price falls are predicted to be below the growth for household incomes. Prices may continue to fall through 2024 and 2025 with low single digits, improving affordability.

    The North will always be more affordable for house prices and the cost of living. Even with the South’s rapid reduction in property price, it remains the more expensive option and widens the North-South divide. For buy-to-let investments, the North holds some of the most affordable opportunities and the best rental yields in the country. This will continue into 2024.

    Mortgage Rates in 2024

    The lower house prices fall, the higher mortgage rates will continue into 2024 as the market adjusts. However, if mortgage rates decrease quicker than expected alongside rising household income, both demand and completed sales will increase.

    By historic standards, mortgage rates of 4-5% are low, despite the recent fluctuation and the speed of this summer’s increases. High mortgage rates are predicted to persist for longer into next year. Zoopla estimates rates to fall to 4.5% and remain so into 2025. This will be the main factor to support sales and reset affordability for homes.

    The Bank of England predicts that inflation will finally reach its target of 2% in H1 of 2025. If mortgage rates do fall faster than expected next year, this target – and affordability – will be closer within reach.

    Buyers and Demand in 2024

    Demand in the current housing market is more from the adjustment of higher borrowing costs rather than the declining house prices. Activity should return in the first half of 2024 when mortgage rates steady between 4-5%. This will spur buyers who have been delaying home moves.

    Ultimately, affordability must improve to bring buyers back to the market. Zoopla suggests that one of two scenarios should happen for affordability to reset and demand to return.


    1. House prices need to fall further and incomes increase or
    2. Mortgage rates alone must reduce

    This will return confidence to buyers, aiding them to make larger purchase decisions. Such decisions, according to Zoopla, “hinge more on financial ability and willingness of people to move when mortgage rates are in the 4-5% range.” Once mortgage rates steady and affordability improves, the housing market in 2024 will see a rebound in activity.

    Want more guidance on BTL mortgages?

    Download the CityRise BTL Mortgage Guide

    If you are still feeling tentative about the current market and are unsure what it means for a BTL mortgage, we untangle some complexities and navigate you through what to expect.

    Click here to download the CityRise BTL Mortgage Guide.

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