Is the house price boom over?

Not only did the covid crisis come as a complete shock, so did the house price boom that followed it.

According to figures from the Halifax, the average UK house price rose from £252,229 in January 2021 to £276,759 in January of this year, an average rate of growth of 9.7%

Looking back, it is possible to see the factors that triggered the house price boom. There was the pandemic-fuelled shift to home working, causing homebuyers to rush off to buy larger properties in rural locations outside of cities and large towns. 

Overall house prices remain around £24,500 up on this time last year, and £37,500 higher than two years ago.

There was the Government’s stamp duty holiday, which triggered panic buying as people were desperate to buy before the deadline came and the savings ran out.

Then of course, there were the historically low interest rates. These made expensive houses much more affordable, and generous bids – in some cases above asking price – routine. 

But the positives that made the market a sellers’ dream and a buyers nightmare may be coming to an end. 

What next for the housing market?

Stamp duty is back, city offices are starting to fill with commuters again and inflation is hitting hard. Inflation is a double-edged sword. Not only does it mean household budgets are becoming increasingly tight, it means that the Bank of England will increase interest rates. The era of the cheap mortgage is over.

All the factors that created the house price boom may no longer be in play.

Property website Rightmove has also predicted the market will be closer to “normal” by the end of this year.

The slowdown may have already begun. According to the Halifax, trading volumes are returning to more normal levels. 

“Despite record levels of first-time buyers stepping onto the ladder last year, younger generations still face significant barriers to home ownership as deposit requirements remain challenging.”

But the slowdown may not tip over into a fall. Despite the growing challenges of inflation and affordability, there remains an overall shortage of homes. People may still be prepared to make sacrifices to buy the home they need, even if hikes in interest rates substantially increase the real costs of buying that home. 

But there could be some bargains to be had

The spring is when the housing market traditionally comes back to life and there should be a bigger choice of homes to buy across the country. More choice may be good for buyers – and among the homes for sale will be some from sellers who are wary of the future and keen to sell a home that might just become a financial millstone.

At the same time, many large mortgage lenders still have plenty of capital in hand and are keen to use it. Big lenders can afford to keep rates low for a while longer and most have not updated their affordability requirements.

If you are in the market for a new home it could be a good time to search the market to find one and take advantage of borrowing rates that still remain low.

What should you do?

A change in the market conditions might mean that it is time to rethink your plans. You cannot rely on the home you buy shooting up in value, so getting the very best deal to buy it becomes even more important. 

If you are planning a move, you should certainly seek out expert help with getting the most suitable mortgage deal while they are still available.

If you are planning on staying put, it might be time to consider a remortgage, to lock yourself into low rates. Most observers believe that rates are on the way up and will never be this low again.

Fortunately, there is a very simple way to secure the mortgage or remortgage deal that is right for you. Call us at Continuum. We can help you identify the most appropriate solution to your mortgage needs – and search the entire market to find it. 

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage products, you should seek independent financial advice before embarking on any course of action.

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

January-2022-house-price-index.pdf (halifax.co.uk)

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