House Prices To Fall This Year?

The average UK house price reached a new record high in June, rising by 0.3% on the previous month, but it’s the smallest rise since January this year. This could be in indicator that the extraordinary housing market is beginning to cool and readjust itself.

With a very strong first half to the year, rising interest rates and inflation today announced by the ONS to be at 9.1% (and predicted to go higher), buyer behaviour may change to reflect the increased cost of living.

Affordability is a big concern for buyers. Not only is the Bank of England looking to push interest rates to 2% by the end of the year, the ratio of average house prices to average earnings (HPE) currently stands at 7.7– above even the previous peak of 7.5 seen just prior to the 2008 financial crash.

This doesn’t mean there will be a crash though.

Back in 2008, interest rates were nearly 6%. About three times higher than the Bank of England’s target for the end of 2022. Also in 2008, banks withdrew lending, whereas the opposite is happening now.

This means that despite prices reaching the top end of affordability, they haven’t tipped over it yet.

Unemployment is at an almost 50 year low (3.8% now vs 8.4% in the aftermath of the 2008 crash), interest rates remain far lower than the historical average (a whopping 9.24% from Jan 1975 to today) and demand still remains strong.

With all this considered, I feel that the market is (or is close to) topping out.

So, my advice would be:

• Sell now if you are considering it (there is still a delay in conveyancing, so getting on the market now will give you the best chance to be in your new home by Christmas)
• If you are a landlord, it might be a great time to refinance your properties and extract maximum value, so you are able to purchase more
• And if you are a homeowner, you should look to fix your mortgage costs for as long as possible. The differences between a 2-year fixed rate and 10-year are as little as 0.25%.

 The average UK house price reached a new record high in June, rising by 0.3% on the previous month, but it’s the smallest rise since January this year. This could be in indicator that the extraordinary housing market is beginning to cool and readjust itself.

With a very strong first half to the year, rising interest rates and inflation today announced by the ONS to be at 9.1% (and predicted to go higher), buyer behaviour may change to reflect the increased cost of living.

Affordability is a big concern for buyers. Not only is the Bank of England looking to push interest rates to 2% by the end of the year, the ratio of average house prices to average earnings (HPE) currently stands at 7.7– above even the previous peak of 7.5 seen just prior to the 2008 financial crash.

This doesn’t mean there will be a crash though.

Back in 2008, interest rates were nearly 6%. About three times higher than the Bank of England’s target for the end of 2022. Also in 2008, banks withdrew lending, whereas the opposite is happening now.

This means that despite prices reaching the top end of affordability, they haven’t tipped over it yet.

Unemployment is at an almost 50 year low (3.8% now vs 8.4% in the aftermath of the 2008 crash), interest rates remain far lower than the historical average (a whopping 9.24% from Jan 1975 to today) and demand still remains strong.

With all this considered, I feel that the market is (or is close to) topping out.

So, my advice would be:

• Sell now if you are considering it (there is still a delay in conveyancing, so getting on the market now will give you the best chance to be in your new home by Christmas)
• If you are a landlord, it might be a great time to refinance your properties and extract maximum value, so you are able to purchase more
• And if you are a homeowner, you should look to fix your mortgage costs for as long as possible. The differences between a 2-year fixed rate and 10-year are as little as 0.25%.