The forecasts from the (OBR) Office for Budget Responsibility state that the rising mortgage rates and the pinching of household incomes may lead to a 10% fall in house prices for the next two years. If you are planning to invest in a property our expert estate agent in London Bridge can assist you with their premium services and extensive local network.

Mortgage rates in England surged after the tumultuous ‘mini budget’ presented by the PM Liz Truss, in September 2022. The tax-cuts in the mini budget induced the famous sell off, of the government bonds in the market, ultimately leading to the intervention from the Bank of England and the subsequent resignation of the PM.

Reason for high House Prices

The data provided by Nationwide Housing Society, states that the housing prices since the last decade have increased by 60%. Evaluating the current scenario, the insufficiency of housing stock and high demand for properties has influenced the change in prices.

Although the lower interest rates have also been a driving force of the estate market, as the borrower could easily get mortgages at affordable rates. The rising interest rates from 0.1%-4.25%, which have been revised 11 times by the Bank of England to control the most critical inflation point in the last 40 years, has resulted in a decline in property market.

All this simply means that the potential buyers have put their intention to purchase property on hold because they want to avoid being laden with debts, due to the current interest rates of the market.

The rates have been forecasted to climb further in 2023. This will hit the mortgage repayment prices higher up, further spiralling down the housing market. The high inflation always put constraints on household budgets which in turn leads to significant slowdowns in the housing sector as householders can not afford to purchase property.

Housing Prices Indices

As per the statistics reported by the Nationwide Building Society, housing prices dropped by 3.1% from the year to March. This has been the most drastic fall since 2009 as people struggle to keep up with the living cost and rising mortgage rates.

The chief economist at Nationwide, Robert Gardner said, “Higher borrowing costs have added to stretched housing affordability at a time when household finances are already under pressure from high inflation.”

Mr Gardner further added that it would be quite difficult to regain the balance and impetus this year as the earnings cannot match with the inflation.

Looking at the reports of Halifax (UK’s largest mortgage provider) the prices have scaled up to1.6% from the year to March witnessing the slowing in growth up to 2.1% from year till February. Whereas it was reported at a high of 12.5 % till June.

This extensive unpredictability around the rising interest prices and cost of living crunch has greatly impacted the housing market.

Do Prices vary in different properties?

The housing preferences saw a cataclysmic shift during the pandemic, and mortgage lenders continue to witness the change in price drifts between various property types.

Since the pandemic, the demand and prices for separate and remote family houses has continued to surge rapidly than flats.

As a big number of workforces still prefers to work from home few days in a week, the demand for big spaces with home offices and large gardens has been on the rise. The hybrid work model has ensured that the surge in demand for larger properties grows unabated.

The demand for large properties outside the big cities, in coastal and rural areas has also gained significant momentum. As people understood the benefits of green and open spaces, during the lockdown, the interest in properties located in hotspots with good connectivity to the cities has seen an upsurge.

Hotspots like Richmondshire, Devon and Conway have garnered treble the prices for property as compared to the national average. Commuter towns have also witnessed rise in property rates with people returning to their workplace.

Are House Prices going to smash in 2023?

No one can predict what the future holds, although the spike in base interest rates has sparked rumours of a crash in the market.

The increase in base interest rate by the Bank of England to 4.25% has forecasted a drop in demand and fall of housing prices.

The rising inflation, jump in energy and petrol prices, cost of living crunch and rise in taxation squeeze household spending, leaving householders with lesser expendable income to spend on purchasing a property.

However, the demand in many areas in the UK still outweighs the supply and with falling mortgage rates, buyers are still in the market. This is to say that high demand will not let the market crash but rather witness a fall.