Market Update – December 2022

IMG_1163 - UpdatedThe past twelve months have certainly been eventful, the Bank of England has raised the base interest rate from 0.25% to 3%, the cost-of-living crisis has taken a grip, inflation is running at over 11%, we have had three Prime Ministers and four Chancellors.

So, what impact has this had on the housing market?

As we know, the housing market experienced a strong period of activity from the outbreak of Covid through to Spring of this year. This was fueled by historically low mortgage interest rates, below 1%, and a stamp duty holiday which created a huge spike in buyers resulting in a shortage of available properties. This pushed prices to record levels mid-way through the year. Since then, the market has lost its way caused by the turbulent events of the past year, denting confidence.

Prices a few months ago may have been artificially high, many buyers who feared missing out were prepared to offer inflated figures above asking price, overheating the market.

During Liz Truss’ tenure as Prime Minister the financial markets reacted badly and mortgage lenders became overly concerned, raising interest rates sharply with a 5-year fixed rate mortgage deal in October reaching 6.65%. Higher rates have made mortgages harder to afford and as the cost of borrowing has increased, property values have dropped.

Today, confidence and stability are starting to return, mortgage lenders are now slowly but cautiously reducing their rates with many 5-year deals in the 5% – 6% range. House prices have definitely slipped over the last six months as the market re-adjusts; available housing stock is at its highest point in recent years with buyers now having a far greater choice of property.

The abnormally low interest rates experienced in Covid times are now a thing of the past and as we find the “new normal” for mortgage interest rates it is hoped and expected they may settle around 4.5%, however this is very much dependent on the state of the economy.

We have seen many sellers adjusting their prices to suit the current market as they are mindful of the number of properties they are competing with to secure a buyer. Properties are still definitely selling, albeit at lower prices than in the early part of the year. Demand to purchase is still there and many committed buyers are now feeling more confident to take advantage of lower house prices and enjoying a wider choice of properties available to secure the right home.

We are very positive about the next few months, as week by week we are seeing more sellers choosing to adapt to the new conditions; those that don’t won’t sell and eventually will withdraw from the market and many buyers will see this market as a great opportunity.



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