Housing market activity was relatively subdued during the first half of the year, reflecting persistent affordability pressures. Political and economic uncertainty was also heightened in the period and this may have influenced potential purchase and refinancing decisions ahead of the UK General Election at the start of July. As a result, property transactions and mortgage completions increased only marginally compared to the same period in 2023, which itself saw the lowest level of activity for nearly a decade following a steep rise in inflation and mortgage interest rates. However, there were also indications that the broader housing market could be improving, with an increase in mortgage approvals and house prices returning to growth following a period of contraction.

Inflationary pressures continued to subside in the first half as evidenced by the Consumer Price Index falling to 2.0%¹ in June 2024 compared to the first half of 2023 when the rate of inflation exceeded 10% within the period. This reduction followed a concerted effort by the Bank of England (BoE) to contain inflation through a series of base rate rises, which led to a significant increase in mortgage interest rates. With inflation falling, the BoE held the base rate stable from September 2023 until August 2024 and this led to a moderation of borrowing costs that has begun to pass into mortgage pricing. According to the BoE, the average quoted interest rate on a two-year fixed rate residential mortgage at 75% loan to value reached a peak of 6.22% in July 2023 and has since reduced by 106bps to 5.16% in June 2024.² Likewise, interest rate swap pricing has reduced over the same period with the 2-year interest rate swap down by 108bps from 5.60% to 4.52%.

In the wider economy, prospective borrowers were experiencing an easing of mortgage affordability challenges through increased wages, with average weekly earnings growing annually by 2.5% in real terms from March to May 2024.³ This improvement in circumstances has led to an increase in confidence, with GfK’s Consumer Confidence Index increasing by one point in July to the highest level since August 2021⁴, and the outlook for respondents’ personal financial situation over the next twelve months positive for five consecutive surveys.

House prices also returned to growth in the first half of 2024, with the UK House Price Index registering a modest increase in March 2024 and reaching +2.2% in May⁵, following a period that saw eight consecutive months of contraction from July 2023. According to the Office for National Statistics, the average UK property price reached £285,201 in May 2024, still slightly below the peak of £288,901 reported in September 2022.

UK gross mortgage lending in the first six months of 2024 increased by 1.5% to £111.1bn from £109.5bn in the same period of 2023.⁶ Similarly, property transactions increased by 1% during the first six months to 488,000⁷ and new mortgage approvals, which provide an indication of future completions, increased by 18% to £127.2bn from £107.9bn in the same period of 2023.⁸

There continued to be a strong emphasis on refinancing activity amongst homeowners, as borrowers preferred the certainty of fixed mortgage payments. According to UK Finance, total regulated refinancing increased by 5.3% in the first five months of the year compared to the same period in 2023.⁹ Within this total product transfers, where borrowers take a new product from their existing lender, continued to increase in popularity with volumes up by 9.3% to £96.1bn from £88.0bn in 2023, representing 77% of all refinancing activity (2023: 74%).⁹

Respondents to the RICS Residential Market Survey have reported declining landlord instructions over several years¹⁰, suggesting that landlords are purchasing fewer new properties. There is evidence that this activity is more concentrated amongst amateur landlords, with research conducted by Pegasus Insight showing that 18% of multi-property portfolio landlords plan to purchase new properties in the next 12 months compared to 9% of landlords with fewer than four properties.¹¹ The Group’s own Landlord Leaders study also suggested that 69% of landlords either have already or plan to increase the size of their portfolio, reinforcing the continued trend towards professional, multi-property landlords.

Tenant demand for rental properties remains high, with 83% of landlords reporting strong rental demand in the latest Landlord Trends survey conducted by Pegasus Insight. The RICS Residential Market Survey also suggests that tenant demand has grown consistently for over three years. This mismatch between demand and supply continued to exert upward pressure on rents, with private rental prices in the UK rising by 8.6% in the year to June 2024.¹² Rising rental prices have supported growth in rental yields, which exceeded 6% on average in the first quarter for the first time since the end of 2021 according to Pegasus Insight.

Buy-to-Let mortgage gross advances reached £12.9bn in the five months to May 2024, an increase of 3% compared with £12.5bn in the five months to May 2023. Purchases remained broadly flat over the same period at £3.5bn, while remortgage completions increased by 4% to £9.0bn (2023: £8.7bn).¹³ The period also saw a reduction of 1.2% in Buy-to-Let mortgages outstanding to £301bn in May 2024 (May 2023: £305bn). According to UK Finance, May 2024 saw an increase in monthly completions and was the strongest individual month for Buy-to-Let originations since January 2023.

There was a trend towards refinancing in the Buy-to-Let sector in 2023 driven by increases in mortgage rates however this growth has not continued in the first half of 2024, with overall refinancing down by 6.8% in the five months to May. Within this total, product transfers were down by 11.3% to £18.0bn (2023: £20.3bn).¹⁴

1. Office for National Statistics, UK Consumer Prices Index, June 2024
   2. Bank of England, 2 year (75% LTV) fixed rate mortgage to households (IUMBV34), June 2024
   3. Office for National Statistics, Average weekly earnings in Great Britain: July 2024
   4. GfK, Consumer Confidence Index, July 2024
   5. Office for National Statistics, UK House Price Index, June 2024
   6. UK Finance, New mortgage lending, UK (BOE) purpose of loan, June 2024
   7. HMRC, Monthly property transactions, June 2024
   8. UK Finance, Approvals for new mortgages by purpose of loan, UK (BOE), July 2024
   9. UK Finance, New refinancing and releveraging mortgages, July 2024
   10. RICS, Residential Market Survey, May 2024
   11. Pegasus Insight, landlord Trends Report, Q1 2024
   12. Office for National Statistics, Price Index of Private Rents, June 2024
   13. UK Finance, BTL mortgages outstanding and gross lending, June 2024
   14. UK Finance, BTL Product Transfers and other refinancing, June 2024