In 2024, due to the decrease in mortgage interest rates, the UK housing market is gradually recovering, with an increase in housing sales and sufficient housing supply in the market. Compared to last year, transaction volume increased by 19% and buyer demand increased by 25%.

The example in the UK is exactly the opposite. Compared to interest rates and rising real estate prices, its impact on monthly payments is still minimal and offset by higher total loan costs. In addition, longer loan terms may drive up the value of real estate.

Changes in the average monthly mortgage repayment amount in the UK

In the past fifteen years, mortgage loan terms in the UK have been significantly extended. According to a decision made by the French High Commission for Financial Stability (HCSF) in 2021, the term of mortgage loans in France is limited to 25 years, and now the term of an increasing number of new mortgage loans is almost unimaginable. By 2024, over 50% of new mortgages in the UK will have a term exceeding 30 years, compared to only 10% in 2005. In the first quarter of 2024, mortgage loans with a term of 40 years or more accounted for nearly 10% of new loans.

At first glance, extending the loan term seems to be an attractive idea for promoting home purchases. All other things being equal, installment payments can reduce monthly repayments, thereby improving a family's ability to repay loans and helping them obtain credit. According to our calculations, while keeping the interest rate and average loan amount unchanged, extending the loan term will reduce the average monthly repayment amount of new loans from January 2013 to September 2024 by approximately 10%. In fact, these monthly repayment amounts remained relatively stable between 2013 and 2019, as the effects of lower interest rates, longer repayment periods, and increased borrowing amounts due to rising housing prices offset each other on average. At the same time, the average disposable total income of British households increased by about 23%, and the affordability rate at the time of loan disbursement decreased to an average of 18% in 2019 (compared to an average of 20.3% in 2013).

It is expected that by 2025, the sales of houses in the UK will reach 1.15 million units, an increase of 5% compared to 2024. The expected sales completion for 2024 is 1.1 million sets, an increase of 10% compared to 2023. The activity of the sales market is supported by income growth and changes in loan institutions' evaluation of repayment ability. First time homebuyers will still be the largest group of homebuyers, driving the flow of the housing chain. People have diverse motivations for selling and moving, driven more by practical needs such as aging population, rising living costs, and changes in work patterns.