Is the property market boom really over?

UK house prices rose faster in 2021 than in any calendar year since 2004, according to the Halifax. Low-cost borrowing and stamp duty holidays led to prices increasing by 9.8% (around £24,000 for the typical home) the fastest for any year since 2004.

The average UK property price hit a new record high of £276,091 in December.

But what happens now, with households facing a squeeze on their finances, stamp duty back and the potential for low-rate mortgages fading fast?

The market is still buoyant – for the present

As one of the UKs largest lenders, the Halifax is in a good position to see the figures that really count – the numbers of mortgage applications and the amount being borrowed.

The mortgage lender noted that that while house prices continued to climb in May, taking the  average price of a house to another record high of £289,099, there are signs that the rate of growth has started to slow.  

But is this an early sign that the house price bubble is about to burst?

The view from the market itself

Estate agents said the survey from Halifax confirms what they are seeing on the ground.

The cost of living crisis and successive interest rate rises are having an impact, and so is declining confidence about the immediate future.  But despite the growing squeeze on household budgets and a steady increase in borrowing costs, the housing market is still active. Demand is being supported by a strong labour market with unemployment at 50-year lows, and job vacancies at a record high. 

The stock of homes on the market has remained finite, keeping upward pressure on house prices as people who outgrow their existing homes need to move up the ladder.

But what happens to house prices now?

The consensus seems to be that the housing market will slow steadily as the year progresses. Household finances look certain to remain under pressure with inflation already in the realm of double digits. Despite a busy jobs market measures of consumer confidence have already fallen. 

More important still, the Bank of England has signalled its intention to raise interest rates further. This will exert a chilling effect on the market when the hikes feed through to mortgage rates, and when as a result buyers find that they are overstretched.

In other words, people will not be able to continue to afford ever higher prices for the homes they want. 

But more worrying for people who have bought recently, will prices actually fall?  A fall in house prices could leave them in the realm of negative equity, when their home has a market value less than they paid for it. It’s a problem if you want to sell your home, and can make it difficult to remortgage. Many lenders won’t let people with negative equity switch to a new mortgage deal when their existing one ends.

Fortunately, there seems to be little prospect of a major house price correction. A recession in the UK– when and if it comes – is likely to be short lived, and the underlying strength of the economy, plus the continuing shortage of homes should help keep current prices viable.

What should you do?

In challenging times, it makes sense to have an expert at your side.

At Continuum we are ready to help you find the mortgage you need whatever happens to the housing market.

So, if you are ready for a move and want a loan than puts your new home in reach, or need to look at a remortgage that can help you afford the one you already have, contact us

We are independent, so we can look at the offerings of all the mortgage lenders and even introduce you to deals that are only available to broker services like ours.

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.

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