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Mortgage Rates Drive Housing Downturn

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  Published in House and Home on Thursday, January 8th 2026 at 3:07 GMT by The Irish News

Mortgage Rates: The Key Driver of the Downturn

Halifax attributes the cooling market primarily to increased mortgage rates. As the Bank of England implemented measures to combat inflation throughout 2023, mortgage rates rose sharply. This significantly impacted affordability for prospective buyers, reducing demand and putting downward pressure on prices. The market's sensitivity to interest rate fluctuations is now abundantly clear, with any indication of further increases likely to exacerbate the slowdown. The recent data strongly suggests that the era of ultra-low mortgage rates is firmly over, and borrowers are adjusting to a new reality of higher borrowing costs.

2024 Outlook: A Flat Market Anticipated

Looking ahead to 2024, Halifax anticipates that house prices will remain broadly unchanged. This forecast reflects a balancing act between opposing forces. While higher mortgage rates will continue to restrain demand, a strong labour market and consistent wage growth are expected to provide some underlying support. The UK employment rate, though showing some signs of easing, remains relatively robust, giving potential buyers a degree of financial confidence. However, real wages - wages adjusted for inflation - have been slow to recover, impacting purchasing power.

"Higher mortgage rates have weighed on demand, and the market is clearly sensitive to any signs of increased rates in the new year," stated Kim Kinnaird, director of Halifax Mortgages. This highlights the precarious nature of the current market, where even a slight increase in borrowing costs could trigger further price declines.

Regional Variations and Future Risks

It's important to note that national averages can mask significant regional variations. Some areas of the UK may experience more pronounced price falls than others, depending on local economic conditions and housing supply. Areas with higher concentrations of first-time buyers, who are particularly sensitive to mortgage rate changes, may be more vulnerable. Furthermore, the possibility of a recession in 2024 remains a concern. Should the UK economy contract, it could lead to job losses and further dampen demand for housing. The impact of potential policy changes, such as adjustments to stamp duty or mortgage lending rules, could also influence the market's performance.

Implications for Buyers and Sellers

The current market conditions present a mixed bag for both buyers and sellers. Sellers may need to adjust their price expectations to attract buyers, while those looking to get on the property ladder may find that affordability remains a significant challenge. Negotiation is likely to become more commonplace, and properties may take longer to sell. Buyers with secure finances and a long-term perspective may find opportunities to secure a good deal, particularly if prices continue to moderate. However, timing is crucial, and it's essential to carefully assess personal financial circumstances and market trends before making any decisions.

In conclusion, the UK housing market is entering a period of adjustment. The rapid growth of recent years has given way to a more subdued outlook, with price stagnation expected in 2024. Mortgage rates will remain a key factor influencing market dynamics, and prospective buyers and sellers should proceed with caution and seek professional advice.