Energy bills and interest rate hikes to destroy the housing market

The glory days of the UK property market are about to come to an end as buyers are forced to “drink a deadly cocktail” of high bills and rising interest rates. According to the Center for Economics and Business Research, house prices will fall 4% in 2023.

But even if house prices are expected to fall later in 2022 and throughout next year, this is unlikely to trigger a buying spree as affordability falls thanks to rising interest rates. ‘interest.

If history repeats itself, a rise in interest rates is usually the precursor to falling house prices, real estate agents are hardly optimistic about what will happen.

Simon Gerrard, Managing Director of Martyn Gerrard Estate Agents and Abbeytown Ltd, said: “The most important word in the housing market is affordability and what these figures don’t show is that it is in down for the overwhelming majority of people.

“Buyers are being forced to drink a deadly cocktail of spiraling household bills and rising interest rates that, simply put, squeeze what they can afford.”

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Mr Gerrard says continuing problems with the market also play into the coming decline, with a chronic problem with supply chains having driven prices up over the past two years, that may still not be enough to prevent price increases from fading.

He continued: “The continued undersupply of housing is the only thing supporting prices – but if interest rates reach nearly 7%, as widely predicted under Liz Truss’ government, everything changes.

“The fact that housing policy is not among the priorities of the two candidates for the post of Prime Minister is bordering on criminal.

“Although it may not be an immediate winner of the vote, reforming our antiquated planning regulations would at least start to get Britain building the new homes we so desperately need. “

And it’s not just bad news for potential buyers. Current mortgage holders will see their finances strained in 2023.

The latest market analysis by Revolution Brokers revealed that the average monthly cost of paying off a mortgage has increased by 56% over the past decade.

But a huge jump is on the way for homeowners with mortgages to pay, as costs are set to rise another 8% by the end of the year.

Revolution Brokers Almas Uddin said: “It’s certainly shaping up to be a tough two months, with house price growth showing no signs of slowing down, while mortgage rates are also expected to rise by some margin from increases observed over the past decade.

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“For those looking to get a foot on the ladder, this means their monthly mortgage payments will now be significantly higher.

“While existing variable rate homeowners will also see their household finances shrink even further.”

Sellers are also struggling. HBB Solutions analysis found that the pandemic market boom of 2020 and 2021 is making sellers overly enthusiastic about the sale price of their home.

While the last two years have certainly seen homes go much more expensive than initially expected, home sellers who choose to lower their asking price are now doing so by an average of 19.8%.

HBB Solutions managing director Chris Hodgkinson said: “What we are also almost certainly seeing are early signs of a market down, as economic pressure from rising inflation and rising costs associated with mortgage rates, in particular, are beginning to undermine buyer confidence and the amount they are willing to pay. »

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