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Lending market predictions for 2024

As we start a new calendar year, we thought we’d share our expectations on what will happen in the UK lending market in 2024. Of course, we don’t have a crystal ball (sadly!), so these are our best-guess predictions based on the current market conditions and our industry experience.

Tightened lending criteria

During 2024, some lenders will likely tighten their loan criteria and the amount they’ll lend. This more cautious approach is a knock-on from the rising interest rates in 2023 and economic uncertainty. In response, businesses may find it more challenging to raise funds and might be restricted in how much they can borrow.

Property price decline

House prices fell in 2023 due to high borrowing costs, forcing sellers to reduce prices to attract buyers. This decline followed a price spike over recent years due to increased demand fuelled by the COVID-19 pandemic and the stamp duty holiday.

We predict a further downward adjustment in 2024, echoed by industry experts.

  • Estate agency Knight Frank forecasts that prices will drop by 5% in 2024.
  • Analysts at Capital Economics predict house prices will fall by 12% by mid-2024.
  • The Office for Budget Responsibility (OBR) expects the average UK house price to drop to £266,000 next year – a decrease of 7.6% from late 2022 prices.

While declining property values aren’t ideal for existing portfolios, especially where financed, they may present an opportunity for investors looking to purchase.

Higher interest rates to remain

Following 14 consecutive interest rates between December 2021 and August 2023 to help curb inflation, the Bank of England (BoE) base rate has stabilised at 5.25%. While inflation has fallen, it’s still too far above the 2% long-term target (although the last figures in December showed much more promising figures!), so it’s unlikely that the BoE will reduce interest rates too quickly in 2024.

On the upside, we’re unlikely to see any further interest rate rises in 2024, and the current rate stabilisation should engender market confidence.

Favouring of variable rates

We may see a movement by lenders away from fixed interest rate products towards variable rates. When interest rates were rising, fixed-rate loans became popular, with borrowers wanting certainty and looking to avoid potential cost hikes. Now that interest rates have stabilised and may begin to decline, we expect borrowers to favour variable-rate loans, and lenders will respond to this shift in demand.

As variable-rate loans can be cheaper than fixed-rate loans (assuming interest rates don’t increase), greater market availability will benefit businesses looking to borrow.

We look forward to seeing how the world of finance pans out in 2024 and which of our predictions come to fruition. If your 2024 plans require finance and you’d like help navigating the lending market, please get in touch.

2004 UK lending market predictions

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