Author: Jones Brown
Next year, UK house prices may experience a fall because of higher mortgage rates. That said, it makes sense that the news sends shockwaves to people.
Meanwhile, the increase in terms of mortgage rates represents a vital thing: the largest hike for new buyers since the late 1980s.
Even though there are signs of slowing the increase, there is still no guarantee that the mortgage rates can go low, like the house prices.
Moreover, the sustained 6% mortgage rates since 2008 hit the buyer’s demand.
Also, the pandemic caused huge effects on everything related to this sector. Yet, this is the first time that the housing market in the UK dramatically experiences a fall in prices.
In fact, there was already a decrease in average house prices in the UK from last September to the current day. From £272,259, the price did go down to £268,282. It is predicted that it will continue to decrease.
Fall of UK house prices and mortgage rates
Regardless of the continuous drop in the average house price in the UK, experts say that mortgage rates are still expected to rise even more. One crucial matter that plays a vital role in this is the inflation crisis in the UK, which currently stands at 10.1%.
At the same time, it is predicted that 4-5% mortgage rates will become the norm. Interestingly, it is also envisioned that mortgage rates will start to fall later, which is expected to be in 2023.
The effect of higher mortgage rates on buyers
According to experts, higher mortgage rates affect buyers differently, especially since almost half of them bought their houses in cash. These buyers who paid in cash experienced less of a hit to buying power compared to first-time buyers and those house buyers who are looking to trade up using larger loans.
Technically, house prices in the UK are influenced by numerous factors, primarily driven by the strength of demand and sales and the ongoing supply shortage.
With everything happening with mortgage rates, it does not come as a surprise to know that the UK experienced a drop in new buyer interest. Furthermore, the fall in new buyer interest has set a record in the South East and West Midlands.
It is also evident in different affordable regions, such as the North East and Scotland. Plus, there have been negotiations asking for price reductions; about 7% of homes are asked for a price decrease of about 5%.
While higher mortgage rates certainly caused an impact on people’s buying decisions, the major influence in the drop in new buyer interest is the lack of affordable finance.
Ultimately, the pricing level of the houses in the UK is expected to have a little impact between now and December. Yet, it will be a bit different next year because it is predicted to only materialize in early 2023. After all, it usually takes several months for pricing to adjust in the face of weaker demand. Thus, house buyers must keep up with the latest on houses and mortgage rates.