A Mid-Year Market Review and What to Expect for the Rest of 2024

The first half of 2024 has seen some challenges in the mortgage market. However, if we take the time to understand these challenges, along with key events and their impact on the mortgage market, we can try to spot the opportunities that lie ahead.

Election fever brought uncertainty to many first-time buyers, with 47% unsure if a change in government would help them get on the property ladder. Now that the Labour party has secured a majority, a shake-up in housing policy is already underway. The new Chancellor of the Exchequer has announced mandatory housing targets, aiming to build 1.5 million new homes by the end of this parliamentary term.

House prices saw a dip earlier in the year but have been rising again as we move into summer. We’re used to seeing these peaks and troughs, but it would be handy to get an indication of what the rest of the year holds. Thankfully, we know just the person to speak to about it!

Cast Your Mind Back to January…

At the beginning of 2024 you might remember we spoke to Keith Church, the Head of Economic Modelling at 4most. He’s back, and revisiting his original predictions to see how they measure up against half a year’s worth of hindsight.

Remember, these are the individual views of Keith and don’t represent those of The Mortgage Lender.

We’ll Avoid Recession

Keith anticipated that avoiding a recession would bring hope for 2024. His predictions have held true so far, with economic growth recorded in both the first quarter and in May. Inflation has been subdued, and interest rates were cut from 5.25% to 5% in August.

Keith says "The recession feels like a distant memory. The new government inherits an improving picture: the economy grew 0.7% in Q1 and by 0.4% in May alone. Inflation is back at target and interest rate cuts are here.” Looking ahead he questions “How long will it be before households feel confident enough to spend on bigger ticket items again?"

House Prices to Decrease

At the start of 2024, Keith foresaw potential decreases in house prices due to higher product rates and stretched affordability. While prices have seen some fluctuations, the anticipated large correction has not materialised, largely thanks to the eventual arrival of long-anticipated interest rate cuts.

Keith suggests that although “Risks of a large correction are lower now interest rate cuts are closer and more certain.“ it still “seems just as likely that prices will move sideways while strong income growth restores affordability."

House Price Stability Amid Higher Living Costs

In January Keith felt that "some of the pessimism on inflation is probably overdone.” And that “affordability will be a key conversation.” Now he suggests that the “housing market looks a little decoupled from an improving economy. This will change. But perhaps will not be back to what we think of as normal until 2025."

So, while the cost-of-living crisis continues to affect households, higher real earnings and accumulated savings would provide some relief and will be something to keep an eye on over the next 6 months.

It’s Moving in the Right Direction, but We'll Be Keeping an Eye on Things

Reflecting on the year so far, Keith's insights provide a mixed bag of cautious optimism. There’s still a sense that we avoided real problems at the end of last year, yet external factors could play their part in influencing the market in the latter months of 2024.

In Keith's view "Most economic indicators have moved in the right direction: growth is up, inflation down, and we can talk with more confidence about ongoing interest rate cuts. It is harder to find a job if you lose the one you have, but arguably that has been part of the cost of getting inflation down. We did dodge a bullet. In retrospect, the pandemic helped households pay down debt, build up savings and muddle through the cost-of-living shock. Households may be less resilient but we can be more optimistic about the coming year. There are challenges. Too many people have left the labour force because of ill health; the housing market needs investment and the US election could create chaos. But on balance we are moving in the right direction."

Keith emphasises that while economic indicators are moving positively, challenges remain. The labour market, housing investment, and potential international political turmoil are factors to watch for now.

TML Are Here for the Rest of 2024 and Beyond

As we digest Keith's comments and look forward to the remainder of the year, it's clear that the mortgage market remains in a state of flux. However, in spite of uncertainty, we stand committed to supporting you through these changes, offering guidance and stability in a dynamic environment.

Here's to a successful second half of 2024, with The Mortgage Lender by your side!

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