- The Zoopla House Price Index shows rising mortgage rates will impact household buying power by 28% if rates reach 5% by the end of the year (assuming buyers try to keep the same monthly payments).
- The UK is shifting to a buyers’ market, as asking price cuts return to pre-pandemic levels.
- House prices are still up 8.2% in a year.
- The increase in the stamp duty threshold to £250,000 takes 43% of homes out of stamp duty and supports the lower end of the market.
Iain McKenzie, CEO of The Guild of Property Professionals, says while getting a good mortgage deal has become significantly harder, a crash in the market is not as likely as some economists are forecasting.
For anyone hoping to see their property in the next year, McKenzie’s expectations may be reassuring.
“Estate agents are still seeing stock shortages in many areas of the country, something which has supported elevated house prices throughout the boom,” says McKenzie.
“The government’s new stamp duty changes will be enticing to first-time buyers on the surface, however, being able to take advantage of the change will largely depend on whether they can secure a mortgage deal.”
“Home buyers are still coming to terms with the sudden leap in fixed-rate mortgages, and it will be some time before we see the full impact.
“Many prospective buyers are rushing purchases through before their approved deal runs out, while others are seeing their hopes of buying fade before their eyes.
“The cooling in house prices seen in these figures is caused by the wider cost-of-living crisis, with energy bills at all-time highs, and inflation hurting many households,” he says.
Zoopla found early signs that buyers are less enthusiastic than they have been: 6% of homes listed for sale had seen the asking price cut by 5% or more – the highest level since before the pandemic.
“Although we tend to see price cuts as we enter the autumn, they’ve warned that this is likely to be an indication we’re moving into a buyers’ market,” says Sarah Coles, senior personal finance analyst, Hargreaves Lansdown.
“With all the factors conspiring against buyers at the moment, it’s difficult to see how house prices won’t soften from here. We are already seeing the first analysts forecasting price falls, and the risks of a correction have increased,” says Coles.
Money anxiety fuelled by market uncertainty
Graham Wells, a financial coach at Haddington-based GroWiser Financial Coaching, says a lot of money anxiety stems from uncertainty and for many, the past week will have fuelled that feeling of dread.
“For those on variable rates or fixed rate deals nearing maturity, it’s worth doing some urgent research to look at options, as the cost of debt is now increasing daily,” says Wells.
“Remember that non-mortgage debt will also get more expensive. Credit cards, personal loans and overdrafts will likely feel more painful and it could be time to re-assess your overall financial picture,” he says.