NEW LIFE – IS THE SCOTTISH PROPERTY MARKET IMPROVING? - BY AMY POLLOCK

It would be reasonable to argue that 2023 was not a good year to buy property; mortgage rates were typically ranging between 5% and 7% depending on the product - a significant increase on previous years where mortgage rates were averaging between 1 and 3%. There was also a growing concern that a crash in house prices was looming. A combination of these issues resulted in a highly unstable market, with buyers finding it increasingly more difficult to secure a mortgage.

Thankfully, things now appear to be looking up, and whilst we may never again enjoy the rock-bottom rates of pre-2023, mortgage rates do now appear to be more settled and on a downward trend. According to Rightmove, as at 10 April 2024 (https://www.rightmove.co.uk/news/articles/property-news/current-uk-mortgage-rates/) the rates are on average 4.84% for a five-year fixed rate mortgage. The lowest available five-year fixed rate deal is 4.13%, with an average of 5.22% for a two-year fixed rate, with the lowest available being 4.46%. These rates appear to remain in line with the Bank of England Base Rate, which at the time of writing, is 5.25%.

Financial markets are currently predicting that the Base Rate is at its peak and that it may come down as this year progresses; that is of course if the rate of inflation levels out and begins to steadily decrease. This in turn will mean we should then start to see fixed rate mortgages reduce also. It is however hard to predict when we will see any substantial drops in the current mortgage rates, but what is clear is that the current rates are now holding steady and are significantly lower than in 2023, so it is all going in the right direction.

There is more good news for first time buyers as Yorkshire Building Society launches its new fee-free deal which will enable first time buyers across Scotland, England and Wales to purchase their first home with only a £5,000 deposit for those wishing to purchase property valued at up to £500,000. In 2023 it was not unusual to see purchasers having to contribute anywhere between 10% and 20% for a deposit, so for first time buyers to now have the option to contribute essentially 1% deposit if purchasing at £500,000, is incredible and a great step to help more first-time buyers get onto the property market. It will be interesting to see whether any other lenders follow suit.  

There has also been some exciting news from April Mortgages who are also launching a new Dutch-style mortgage model in the UK this month for first time buyers who have a 5% deposit. This model is already available to those remortgaging their property who have 85% loan-to-value (LTV) in their home. The Dutch model offered by April Mortgages dictates that the rate of the mortgage will reduce as the loan amount reduces and will essentially mean that if your mortgage is 95% of the value of your home, and you pay off enough to reduce it to 90% of the value, your mortgage will be automatically switched to a lower rate if available. This in turn will mean that borrowers will pay less interest and will therefore be able to pay off their mortgages quicker, which is fantastic for those eligible.

With mortgage rates falling and with the potential for them to fall further this year, and with new products being marketed for first time buyers which offer great incentives, potential buyers who have been biding their time and hoping for better market conditions, may decide to act as their disposable income starts to rise. This should, in turn, increase the supply of homes as sellers will have more confidence that a quick sale is again possible.

It is however yet to be seen whether some sellers could potentially be affected negatively by the market becoming more free-flowing again. It is fair to say that sellers did benefit from higher sale prices due to the decrease in demand during this period. In fact, according to the UK House Price Index published in December 2023, “the average house price in Scotland increased by 3.3% (provisional estimate) over the 12 months to December 2023, up from an increase of 1.1% (revised estimate) in the 12 months to November 2023. The average house price in Scotland was £190,000 in December 2023, which was £6,000 higher than 12 months ago.” 2023 was therefore certainly a fantastic time to sell in Scotland if you could find a buyer, and although sellers will obviously be positively impacted by the falling rates given that there will be an increase for demand and therefore quicker turnaround times, it remains to be seen whether the average property price in Scotland will decrease in 2024 as a consequence of that demand.

All in all, I believe that the Scottish property market in 2024 does look promising and is certainly in much better shape than in 2023- long may it continue.

To discuss how Dallas McMillan can assist you with the purchase of your new home, contact our team on 0141 673 8681.