Hamptons: Lower rates will bring some buyers back to the market in 2024

Lower interest rates and real wage growth will halt price falls next year but sales will remain lower, Hamptons has predicted 

Forecasts from the agent suggest that expectations of wage growth falling inflation next year could feed into lower mortgage pricing, boosting buyer purchasing and demand.

At present, financial markets expect the base rate to peak at 5.75% and to remain there until the summer of 2024. At this point, the markets expect the base rate to begin to fall, ending next year at about 5.3%.

Pre-empting this move, mortgage rates are likely to move downwards more rapidly, declining over the course of the year, Hamptons said.

Assuming the current financial market base rate forecasts are correct, this would mean that the average two-year fixed mortgage rate would fall to around 5.4% by the end of 2024, the agent suggests.

If this is the case, Hamptons expects prices will be flat by the end of next year but down by 1.3% when adjusted for inflation.

Hamptons said: “Interest rates above 5% will be painful for some households. But more economic stability and improved affordability should mean that some people who have delayed relocation in 2023 will decide to proceed. We also cannot see much improvement in the supply of new housing, given the pressures facing housebuilders which should support prices.”

It adds that political uncertainty could be heightened as a General Election may take place towards the end of 2024, but Hamptons doesn’t seem too concerned.

The forecasts said: “Over the past eight years, major political events have had less impact on prices and transactions than was the pattern in the past. Instead, affordability will be the key driver in 2024.”

Hamptons predicts that “slightly lower” mortgage rates in 2024 will encourage more home moves but transactions will be low by historic standards before “pent-up demand” is released in 2025 and 2026.