For the first time at this time of year, since 2002, house prices have been flat, which in today’s economic climate comes as quite a surprise. The housing market is slowing, and we are finding that house prices are falling from their peak, with more significant drops expected throughout 2023.
The smallest-ever increase of £14 from January to February was recorded this year, according to data from Rightmove*, and annual property growth lifted by 3.9% in February, from 6.3% in January. There is also a reduction in the number of sales agreed since the September mini-budget, a giant 30% decrease and this seems to be due to sellers being more realistic on price and a transition to a slower-paced market.
It is a yearly norm for sellers to increase their asking prices as we approach spring but the trend for the first part of 2023 suggests many sellers will break with tradition and show unseasonal initial pricing restraint. Buyers are also utilising the slower-paced market by taking time to find the right property, due to the constantly increasing fees of servicing a mortgage.
What changes has the housing market seen in the last few years?
House prices have risen considerably over the last few years with the average price of a property in the UK rising by £17,000 between January 2022 and January 2023, which equates to a 6.3% year on year increase. The pandemic and stamp duty relief in 2021 brought about a more volatile market, allowing buyers to save up to £2,500 in tax if they purchased a home by 30th September 2021. Halifax** also recorded a price increase of 20.4% between January 2020 and December 2022.
Prior to this, house prices were far more stable, with a small 7.8% increase between January 2017 and December 2019 and it seems now, house prices have begun to fall once more. Nationwide*** has recorded the fastest annual fall in house prices for 14 years last month.
How has this affected the number of houses being sold?
In 2021, with the cut to stamp duty, we saw the property market boom, which resulted in a huge spike in sales, where at its peak in June 2021, around 200,000 homes were sold****. Now, however, house sales are much lower and closer to pre-pandemic levels with an estimated 77,000 transactions in January 2023, a drop of around 30,000 from December 2022. You could argue that January traditionally sees a drop in house sales but compared with January 2022, there has been a 7% fall in the number of houses sold.
What’s been happening to house prices so far this year?
As mentioned previously, house prices have very much fallen from their peak in 2023 and the housing market is slowing, with the cost-of-living crises and high mortgage rates being the main factor affecting the number of homes being sold. Housing experts are also predicting a continued fall in house prices throughout 2023, but the long-term is set to be far more complicated. The OBR (Office for Budget Responsibility) predicts that between now and Autumn 2024^*, we will see a 9% drop in house prices while Rightmove^** only predicts it to be 2%.
What does this mean for mortgage rates?
In the wake of the September mini-budget, we saw mortgage rates sore, which resulted in the cheapest mortgage rate rising to over 5% and many lenders withdrawing hundreds of deals. However, even with house prices dropping, mortgage rates are remaining high, with only a small decrease in the past few months.
Lenders have been lowering rates on a weekly basis, with the lowest now around 4%, but compared to 2021, where the lowest rate was below 1%, we are still very much on the highest end of the spectrum. The Bank of England base rate has seen continuous rises in recent months and is now sat at 4.25% but this could rise further still.
How an independent mortgage advisor can help in times of uncertainty
If you are struggling with your current mortgage deal, are unable to meet the steep rise in repayments, or if you’re coming to the end of your current fixed-rate mortgage deal, then TaylorMade is here to help.
We are a professional, independent mortgage broker with access to the best deals on the market today. We offer jargon free, helpful advice to aid you in understanding how today’s uncertain economy could impact you and how we can help you navigate house price and mortgage price fluctuations.
Get in touch today to see how we can help.
- *Source: RightMove
- **Source: Money Week
- ***Source: Nationwide
- ****Source: The Guardian
- ^*Source: OBR
- ^**Source: RightMove
