In a year like no other, UK house prices have continued to soar, hitting a sixth consecutive record in July, despite the cost of living crisis, the impact of a global pandemic and political uncertainty.
As interest rates rise in the UK for a fifth successive time, making mortgage payments higher for many and stretching household budgets even further, demand for housing still massively outweighs availability, which means that house prices remain on the up.
According to property website Rightmove, the price of property coming to market has hit a sixth consecutive record of £369,968, with a rise of 0.4% this month. The rise is a slowdown on the 2.1% increase between April and May but it has still led Rightmove to revise its full-year 2022 house price forecast in January from 5% growth to 7%.
To buy, or not to buy?
New first-time buyers face record house prices and rising interest rates, meaning that their monthly mortgage payments are now much higher than at the start of the year. So, as the year moves on, it still remains to see how buyers will react as the cost of living crisis tightens its grip.
While the cost of buying a property might feel untenable, for many, getting on the property ladder could seem like a more financially viable option, rather than coping with rising rental costs. With further interest rate rises and soaring energy costs on the horizon, it could be that the prospect of this may drive some to act now to lock in a longer fixed-term mortgage rate.
Tim Bannister, Director of Property Science at Rightmove, said: “In the current fast-changing economic climate, those looking to buy, who find a suitable home they can afford, may choose to act now rather than wait. While more choice is welcome news, the number of homes available remains well below the more normal levels of 2019 and is unable to satisfy the continued high demand that we’re seeing.
“Given the political and economic uncertainty at the moment, those who want to move this year, particularly first-time buyers, may seek some financial certainty by locking in longer fixed-rate mortgage terms now before their monthly outgoings increase again.”
A more stable future
There is good news ahead, with signs of the housing shortage situation improving, and the number of sellers now up by 13%, compared with the exceptionally busy market of this time last year.
More sellers have been putting their homes on the market recently, compared to 12 months ago, although the number of available homes for sale is still 40% down on where it was in 2019.
People selling their homes continue to find themselves in the best possible position as demand for housing remains and buyers try to get the very best mortgage deals before interest rates rise again.
Because of this, the chances of a major drop in house prices (of the magnitude seen in 2008) is unlikely to happen any time soon.
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