Savills says UK house prices will rise this year in a U-turn in line with previous forecasts | house price

A fall in mortgage rates has led one forecaster to reverse his prediction of a fall in UK house prices in 2024 and instead suggest that the average cost of a property could rise by 61,500 over the next five years.

Property company Savills predicted in November that average house prices were expected to fall by 3% this year as a rise in Bank of England interest rates increased affordability pressure on prospective buyers.

However, while the base rate remains at 5.25%, competition among mortgage lenders has lowered borrowing costs and increased market activity. As a result, Savills expects average prices to rise 2.5% to 292,000 in 2024.

Although it downgraded some of its long-term forecasts, it said it expects growth every year until the end of 2028. The average price is expected to rise by 61,500, or 21.6%, to 346,500.

The number of homes expected to change hands this year was also raised from 1.01 million to 1.05 million.

Lucian Cook, head of housing research at Savills, said: “The outlook for 2024 has improved since the last time. [November 2023] Mortgage costs are expected to decrease slightly and be much less volatile. The outlook for economic growth has also improved slightly, with relatively modest house price growth expected this year and the potential for greater growth in the coming years.

It is widely known that the bank's benchmark interest rate has reached its peak, and while some economists had expected a rate cut as early as March, policymakers at their last meeting decided to wait until inflation continued to fall and are expected to keep rates unchanged again. . When we meet this Thursday.

Cook said Nationwide Building Society's 75% two-year fixed-rate mortgage, which was set at 5.35% last November, fell to 4.84% this month, while its five-year contract fell to 4.5%.

These deals are no longer available, with Nationwide and several large lenders revising their deal prices upward in recent weeks, but rates are still lower than November prices.

The highly competitive nature of the mortgage market means lenders are pricing quite aggressively in anticipation of bank rate cuts, restoring buyer confidence and prices to some extent, Cook said. But he said rising prices this year would create additional affordability issues going forward.

Savills expects prices to rise by 14.2% over the next five years in London, which has the highest prices, while in the lower-priced regions of North West England and Yorkshire and the Humber, prices could rise by 14.2%. About twice that.

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Prices in London's most expensive postcode have fallen 2.6% over the past year, according to separate figures from rival estate agent Knight Frank.

Despite the high proportion of cash buyers, sales in central London's main market have not been immune to hesitation caused by fluctuating mortgage rates, it said.

Tom Bill, head of UK housing research at Knight Frank, said: “The close relationship between borrowing costs and demand has been evident across London in recent months. The number of offers in April was 14% below the five-year average (excluding 2020), highlighting how weak demand has been.

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