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As we wrap up what has been a strong year for the housing market, it has gone better than expected with inflation under control and the bank rate on a downward trend. The improving outlook has provided increased certainty for buyers, resulting in a rebound in market activity and a return to price growth!
Starting the year at 4.0%, CPI inflation has decreased toward its 2.0% target, and while it was higher than expected at 2.3% in October, it is forecast to remain close to the target in 2025. The Bank of England reduced interest rates to 4.75% in November, down from 5%, a great boost for the housing market, with forecasts projecting a drop to 4% or lower by the end of 2025. Those who are on tracker rates will feel an immediate boost to their finances, and those on standard variable rates should receive at least some of the cut.
Even though the latest cut did not flow through to fixed mortgage rates, they are still lower than a year ago. The average two and five year fixed-rate mortgages are currently at 5.08% and 4.85% respectively, showing a year-on-year decrease of -0.47% and -0.28%. The next Bank Rate cut should help to improve affordability through 2025. Mortgage approvals in October reached 68,303, the highest level since August 2022, as market activity builds. This marks a 42% year-on-year increase and a 3% rise compared to October 2019 (Bank of England).
