If there’s ever been a month filled with speculation, anticipation, and a bit of volatility, October 2024 is that month. Words like budget, inflation, mortgage and rates have likely been repeated more often now than at any time since Truss’ budget in 2022.
The anticipation surrounding Starmer’s Autumn budget has been high—how will it impact interest rates? What will it mean for landlords? Additionally, inflation has now fallen below the Bank of England’s 2% target, dropping to 1.7%. This shift has implications beyond just interest rates. Consequently, the upcoming Bank of England Base Rate meeting on November 7th has generated considerable speculation, with general consensus moving beyond whether a base rate cut will occur, to a focus on the scale of the reduction.
How has the UK mortgage market performed in October?
On the ground, however, it’s been business as usual. While we’ve received more questions regarding Energy Performance Certificates for buy-to-let properties and an uptick in queries about no-fault evictions, the broader market continues to move forward. Landlords are still actively purchasing properties, encouraged by lower borrowing costs compared to the past 18 months. Residential purchases are also proceeding steadily.
We’ve recently had several lenders visit us at Fowler Smith’s head office, each highlighting their unique selling points to attract more business. They recognise the importance of staying adaptable in a shifting market. For example, one prominent lender in the limited company buy-to-let sector now bases remortgage valuations on market rent rather than current received rent—enhancing lending capacity for landlords with long-term tenants who may be paying below-market rates. It’s these kinds of innovative and responsive adjustments that help the industry progress.
As a company, with two working days remaining in October, we anticipate these trends may strengthen further. Our October application volume has already surged by 48% compared to the same period in 2023, and by an impressive 122% relative to 2022.
What can we expect for the mortgage market moving forward?
October has also brought updated forecasts, particularly from Savills, which initially predicted a 3% drop in UK house prices for 2024. However, this forecast has now been revised to a 2.5% increase. According to Land Registry data (via Which?), annual house prices have risen by 2.8%.
Certainly, the new Labour government’s policies will continue to attract close scrutiny. Yet, as we’ve seen with prior governments, priorities and policies can evolve. In the context of ongoing political shifts globally, we can’t overlook the comparative landscape of SONIA swap rates. As of October 25, 2023, 5-year swap rates were at 4.560%, whereas by October 24, 2024, they had decreased to 3.781%. This shift comes amid a notable rise in swap rates driven by ongoing developments around the US election.
In response, we’ve seen some lenders reducing their rates to sustain lending momentum. Just yesterday, Barclays announced rate reductions of up to 30 basis points. It’s a trend we hope will continue.
There’s a familiar saying—perhaps a cliché—that change equals opportunity. In my view, it holds true. Regardless of what the budget delivers, or any subsequent changes that follow, new opportunities will arise. It will be crucial to seek structured, tailored, and quantifiable advice from a reliable source to navigate this evolving landscape effectively.