In the fluctuating landscape of real estate, one constant that can significantly impact your financial journey is the mortgage rate. Whether you're a first-time buyer or thinking about a refinancing opportunity, understanding the implications of dropping mortgage rates is crucial. Let’s explore the current state of the housing market and why now, with falling mortgage rates, maybe the perfect time to get on the property ladder. 

The Current State of the Housing Market 

The housing market is influenced by various factors, including economic conditions, employment rates, and interest rates. 2023 saw a decline in house prices, and analysts anticipate the possibility of additional reductions in the coming year. 

According to the most recent information from the Land Registry, there was a yearly decrease of 1.2%, with the average house price in the UK reaching £288,000 in October. While there is a consistent downward trend, this figure is not significantly below the previous peak of £292,000 in September 2022. Nevertheless, house prices are still considered prohibitively high for many, particularly low-income and first-time buyers. 

Dropping Mortgage Rates 

Mortgage rates experienced a significant increase throughout 2022 and the beginning of 2023, with the cheapest rates on two-year and five-year deals peaking at 5.96% and 5.28%, pushing many hopeful buyers out of the game altogether. , 2024 has begun with many major mortgage lenders slashing rates in a bid to bring in new business and compete in a tricky market. This is because of high house prices and the property market being out of reach for so many people as well as base interest rates levelling off. 

Now, rates are sitting at 4.6% for two-year fixes and 4.28% for five-year fixes. 

It’s good news for first-time buyers. Here’s why: 

Lower Monthly Payments 

One of the real benefits of dropping mortgage rates is the potential for lower monthly mortgage payments. When interest rates decrease, borrowers can secure loans at more favourable terms, resulting in reduced monthly payments. This can be particularly advantageous for first-time buyers or those looking to upgrade to a larger property, as it effectively makes homeownership more affordable. 

Greater Accessibility  

Lower mortgage rates often translate to increased accessibility to the housing market. As the cost of borrowing decreases, buyers may find themselves newly eligible to get their foot on the property ladder, able to qualify for larger loan amounts or to explore properties that were previously out of their budget, essentially opening up a range of new opportunities to buy a suitable home.  

Considerations for Long-Term Investments 

For property investors, lower mortgage rates may present favourable conditions for long-term investments. The reduced cost of financing can enhance the return on investment and make property acquisitions more attractive.  

The property market has been tough in recent years, particularly for those looking to buy for the first time. Dropping mortgage rates can have a significant impact on individuals at various stages of their homeownership journey but is particularly good news for those who may have been struggling to get their foot on the ladder due to affordability issues. 

If you are eager to buy your first home while mortgage rates are lower, explore how our available shared ownership properties could help you become a homeowner at an even more affordable price.