Next year, more than one million homeowners in the UK will be faced with an important financial decision as their current mortgage terms come to an end. For many, this pivotal moment presents a crucial opportunity to remortgage rather than default to their lender's standard variable rate (SVR). This choice is not only a strategic financial decision but also one that could significantly impact their monthly expenses and the long-term financial health of their household budget.

The UK housing market is expected to be busy next year with Rightmove forecasting 1.15 million transactions. The strong demand in the market is forecasted due to the lower cost of borrowing and rising rental costs. However, cheaper borrowing will be the number one reason for motivating home buyers and home movers to shop for property.

In examining yet another report on the UK housing market the question of affordability is at the forefront. Halifax, the largest UK lender, released their most recent data report revealing another record high in the average house price. The month to month increase amounted to 1.3% as the average house price rose in November to £298,083. The annual growth was 4.8%, which is the strongest increase since November 2022. As this is the average UK house price, there are indeed cheaper averages by regions such as in Scotland or Northern Ireland where the average is lower while the average in London is higher.

During the final 2024 meeting of the Bank of England’s Monetary Policy Committee (MPC), the vote concerning the standard base interest rate is expected to result in the decision to hold the rate steady. After two earlier cuts this year, in August and November, the rate was reduced by 0.25% each time taking the base from 5.25%, a sixteen year high, to 4.75%. There had been hope for a third cut by the MPC, especially since inflation had fallen to 1.7% in the twelve months to September and reported in October. This is below the target of 2.0% set by the Bank and the purpose of higher interest rates, however, the next inflation report released last month revealed inflation had grown to 2.3% unexpectedly higher than projected. This stifled any hope of another rate cut in 2024.

The Bank of England has reported that over half of UK homeowners will experience higher mortgage repayments during the next three years. About one third of the homeowners have so far been shielded from the higher interest rates that began after the pandemic due to their current fixed rate mortgages. It was in December 2021 that the historically low standard base interest rate of 0.1% began to rise and by August 2023 had risen to 5.25%. Between 2021 when the base rate reached a peak of 5.25%, homeowners who chose a fixed rate mortgage or remortgage might have chosen a rate much lower than the current offers from lenders.

Due to cheaper borrowing rates from lenders, home buyers responded to the opportunity and the UK housing market experienced the fastest annual growth in two years for November. According to Nationwide, the average house price grew by 3.7% compared to November 2023. This level of growth in the housing market was surprising to experts. Despite lower interest rates, house prices remain elevated, and consumers have yet to fully feel the relief from lower inflation to have found saving for a deposit affordable. As a result of the boost in the market, the increase in house prices is likely to increase property values of homeowners at a time when getting the best remortgaging rate possible is important.