The economy was in a good place and on track with post-COVID recovery before the mini-budget. Since then we have had a couple of mortgage interest rate hikes and should expect another next month.
Supply of mortgage products was down 20% and 1.2 million households’ mortgages were up for renewal this year, that’s around 100,000 a month nationally. Some of the other issues we face include a weak pound and given our imported food is paid for in dollars, this increases our cost of food. Add a war into the mix and this impacts our fuel costs. Overall, the cost of living is up and so is borrowing.
What does this mean for the property market? Is it getting spooked?
Speaking on a daily basis with buyers, vendors, investors and landlords, the picture varies, depending on who you speak to and their situation. We also look at the data provided by our data provider, Dataloft. The reality is, people will continue to want to move and therefore buy and sell houses. Fact. It is extremely difficult to make house prices go down. Since the Second World War, there have only been 16 price drops. The last recession was the last real drop and that was primarily linked to subprime and self-certified mortgages. The world was a different place. We are now able to work from home due to technological advances, which means the economy has been able to continue even during a pandemic. Yes, mortgage rates have and will increase, but borrowing is still cheaper than it was 14, or even 22 years ago (14.4%). I remember having to pay 8.5% on a mortgage. The situation is different. In 2008 banks were insolvent, now they have the cash, they are just uncertain to lend. This will stabilise as our economy stabilises. At the moment there are many uncertainties, which are impacting the financial markets.
Nationally, there will be areas of the country that see a small drop in sale prices. This however will not be the case in every town or village. Hastings and surrounding areas have seen a dramatic increase in property values over the last couple of years after a long period of being undervalued. It is essentially catching up. Comparatively, it is still an affordable place to live. Whilst the train line is not the best, if you are only faced with commuting twice a week, then that journey becomes acceptable. Hastings has been in the press a lot, and people are now keen to find a rural or seaside property with that extra bedroom ready to be turned into a home office. Our volume of buyers from outside the area has jumped significantly over the last 18 months. People are still keen to move into the area and places like Hastings will remain buoyant. The market is now more considered and what we would call a pre-pandemic pace. Sale prices are stable, but buyers are now scrutinising surveys, in turn, driving price reductions.
The 5% base rate is here to stay as the new normal, meaning both buyers and vendors will need to get accustomed to this rate of borrowing for the foreseeable. But, people will still want to buy houses.
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