Trends and predictions for the UK Property Market – 5 years of data

Image of houses on a UK high street with building, slaes and renting signifying the state of the UK Property Market

Table of Contents

5 Years of data sourced from Saville’s and the Bank of England paint a picture of opportunity in the UK Property Market


Over the past few years, the UK property market has experienced significant changes, driven by fluctuating interest rates, economic uncertainties, and evolving demand patterns. For potential Buy to Let (BTL) investors, understanding these dynamics is crucial for making informed investment decisions. This analysis delves into the recent data on house prices, mortgage rates, and rental trends to provide a comprehensive outlook for BTL investments in 2024 and onwards.

In summary, whilst there is significant frustration amongst BTL investors about the spiralling costs associated with property investment, from a taxation point of view, EPC and tenant legislation costs and from higher interest rates on their loans, but is it all doom and gloom on this front? Looking at the numbers some short term pain suggests that there will be long term gains and in the following blog post we explore some of those number and charts to see where and why.

House Prices: Trends and Predictions

The question about house prices has confounded most analysts. Many predicted drops of up to 15% as a result of increased mortgage costs and that simply has not occurred. The fact is that with BTL mortgages being tied to rental incomes, and there being a shortage of new property, the demand for ownership has stayed very high, and whilst the costs have increased, putting pressure on affordability for first time buyers with smaller deposits particularly, the rising rental costs have outpaced this and look to continue to. For most buyers getting on the ladder is all that matters because as house prices rise, if they increase over and above the rate at which their savings can grow there will be a point they are priced out of the market entirely.

Average UK House prices against BoE Base Rate
Average UK House prices against BoE Base Rate – Despite a sudden rise in rate, the average UK home is more expensive than it was prior to the base rate increase and continuing to trend upwards.

Looking back to 2019 house prices rose from £231K to £293K in 2022, dipping slightly but recovering to around £291k now. That’s a 20% increase in just 5 years. A 10% deposit in 2019 of £23,100, increasing 5% per annum would be worth £29,100 5 years later. Its barely keeping track of these rising prices. If house prices have continued to rise despite drastically rising interest rates, what will happen when those interest rates come down? There most likely will be a surge in buyers looking to move which should see an increase in prices, yet the returns on a saved deposit will likely drop.

One of the factors regularly citied for lower transaction volumes is affordability pressures. With wages stagnant and mortgage rates increasing the amount lenders want to or are allowed to lend based on income should drop also, however whilst this is true to an extent, its not nearly as significant as assumed. The simple fact is that for over a decade lenders have been working on a stressed interest rate of over 7%. That is, they assume the client will be paying an interest rate of 7% when working out how much to lend them. As a result whilst those stress rates have increased somewhat, its not nearly as impactful as the change in Bank of England rates. Prior to the rise standard variable rates were around 4.5%, now they are around 7.5%.

Net New Homes and Average House Prices against BoE rate
Net New Homes and Average House Prices against BoE rate – A fall in new homes delivered may be a key factor in rising house prices despite increased lending costs

If we look at the numbers on new stock being built, that also paints a grim picture. Despite demand being high and prices staying buoyant, the number of new build properties coming to market is showing some decline. Without an increase in new properties to serve the growing population, house prices will likely continue to rise. The Financial Times recently reported, based on data from Saville’s where much of the data this analysis draws from, that the number of new homes in England is predicted to drop to half of official target

If you are a first time buyer and have the deposit you need now, then waiting for house prices to fall before making a purchase could be a mistake… There’s a very real likelihood that prices wont fall in any meaningful way and that the return on savings might diminish, leaving you at risk of not having enough for a deposit.

Rental Market: Strong Growth Amid High Demand

Bad news for first time buyers likely signals some opportunity for BTL investors. Rental prices show no signs of falling in the near future and have kept pace with the bank of England rate rises. Given what we have seen over the past decade or so, its fair to say that rents wont drop in a similar way, certainly not if the number of new homes remains flat and house prices continue to rise.

Price to rent ratio against BoE base rate
Price to rent ratio against BoE base rate

Whilst the price to rent ratio rose significantly in the early years of the Bank of England rate rises, this has subsided and is trending gradually downwards. We are already seeing some relief in new applications more often meeting rental calculations and this is likely to continue to improve. Whilst mortgage costs are still high and fixed rates over 5 years might not appear profitable in the short term, as those rents continue to increase profits should improve. This in line with slow but steady increases in house prices paints a positive picture for BTL investors if they can weather the storm in the short term.

Private Rental prices against BoE base rate
Private Rental prices against BoE base rate


Mortgage Costs: A Double-Edged Sword for BTL Investors

Whilst the numbers represented in this graph cover all the 5 year deals, both residential and BTL, it suggests that mortgage lenders are factoring as best they can future drops in interest rates, and whilst pre summer 2021 they were maintaining a reasonable surplus over and above the Bank of England rate, since that increased they have stayed mostly below that rate. One of the reasons we often recommend the longer term fixed rates is because it is so very closely tied to predictions from the wider financial markets, and the swap rates that they use to give themselves security over fluctuations. Whilst those costs seem high to many, the market is still wildly unpredictable and if a property is only just “washing its own face” as they say at present, there’s likely far more chance of further turmoil in the economy that drive them up higher than there is surety that they will come down. Already we have seen small increases as “the market” predicts the fall of interest rates is likely to come later than expected.

90% Average Five year fixed rates against rental price rises
90% Average Five year fixed rates against rental price rises

The reason for lenders eagerness to keep rates as low as possible is illustrated by the net lending volumes, which have fallen sharply after an initial surge. As rates shot up, those who were on the fence made their move and secured what they could, and as they increased those volumes dropped off significantly with at least 2 quarters where more people paid off mortgages than new loans were granted. Given such a drop in lending volumes its no surprise that lenders are working again on razor thin margins and aiming to maintain their market share. As a result, whilst many assume lenders would be quick to capitalise on rising rates, they simply haven’t had the opportunity and need to stay competitive.


Net UK Mortgage Lending against the BoE base rate
Net UK Mortgage Lending against the BoE base rate 



For potential BTL investors, 2024 presents a complex landscape characterized by rising mortgage costs, strong rental demand, and a recalibrating housing market. While the higher borrowing costs pose challenges, the long-term fundamentals of the rental market remain robust. Investors who strategically manage their portfolios, leverage favourable financing options, and stay informed about market and regulatory trends can still find lucrative opportunities in the UK’s BTL market. The current environment of rising rates and limited housing supply presents both challenges and opportunities for BTL investors. The long-term potential for capital appreciation and rental income growth remains strong, making property investment a viable and lucrative option.


Picture of Author: Stuart Phillips

Author: Stuart Phillips

Fully CeMap qualified, Directly Authorised by the FCA and with over a decade of experience, Stuart has a wealth of experience in both specialist BTL and residential mortgages.

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