Housing Market - Hope for the Future?

A lot has been going on in the property market of late. Mortgage rates are rising, house prices are falling, and many homeowners are feeling uncertain about the future.

There are some sparks of good news to be seen amidst the doom and gloom, however. Inflation is finally falling – down from 6.8% in the year to July compared with June’s figure of 7.9%(1) - while Bank Rate is also thought to be nearing its peak.

Bank Rate hits 5.25%

The latest meeting of its Monetary Policy Committee on 3 August 2023 saw the Bank of England (BoE) increase Bank Rate for the 14th consecutive time to 5.25%(2). Higher interest rates make it more expensive to borrow and spend, thus reducing demand and slowing price growth.

Positively, however, there now appears to be consensus amongst economists and financial experts that Bank Rate is finally approaching its peak.

House prices fall

As they are led by Bank Rate, mortgage rates have also been rapidly increasing. The average rate for a two-year fixed mortgage at time of writing stands at 6.73%, according to MoneyFacts(3) – up from 2.34% in December 2021(4). According to the latest UK Residential Survey from the Royal Institute of Chartered Surveyors (RICS), higher mortgage rates have led to a sharp downturn in demand from prospective homebuyers. Nationally, a net balance of -45% respondents noted a decline in new buyer enquiries, whilst -44% reported a decline in sales agreed(5).

Nationwide’s House Price Index(6) found that house prices fell by 0.2% month-on-month and 3.8% year-on-year in July, while Savills expects a continued downward trajectory as high mortgage rates continue to suppress the market.

What does the future hold?

In the short term, homeowners and prospective buyers can expect more of the same; high interest rates – and therefore mortgage rates – are expected to persist until at least 2025 to ensure that inflation falls back to the BoE’s 2% target. Looking further ahead, things look brighter. Although Savills predicts that house prices will fall by 10% this year, it forecasts a return to marginal growth in 2024 (1%) and 2025 (3.5%), and then much stronger growth in 2026 (7%) and 2027 (5.5%)(7).

Advice continues to be vital

In difficult economic times, professional advice continues to be vital to ensure that you are making informed decisions about the most suitable products and solutions for your circumstances. Although the future currently seems uncertain, we’re here to advise and guide you on your mortgage options – whether you’re a first-time buyer, coming to the end of your mortgage deal, or looking to move.

If you are feeling concerned or unsure about your mortgage, please don’t hesitate to get in touch.

Your home may be repossessed if you do not keep up repayments on your mortgage.

1. ONS, 2023 2. Bank of England, 2023 3. Moneyfacts, 2023 4. Moneyfacts, 2022 5. RICS, 2023 6. Nationwide, 2023 7. Savills, 2023