BREAKING PROPERTY NEWS – 17/10/2022

Daily bite-sized proptech and property news in partnership with Proptech-X.

 

Why buying or owning a home with a mortgage is going to be painful

Jeremy Hunt, the fourth Chancellor in less than a year, will unveil his fiscal plan in two weeks. Regardless of how it is received, interest rates will immediately rise. If Truss is then ousted as Prime Minister, we will be looking at a fifth Chancellor before Christmas and yet more mayhem.

However you cut it up, uncertainty, inflation, war and political instability are always bad for markets, and that includes the housing market.

Each year around 1.2 million homes complete, with a third of these being sold to first-time buyers. Covid and the third last Chancellor Rishi Sunak, with his giveaway SDLT scheme, distorted these completion numbers a little, but each year 400,000 plus homes sell to new buyers.

The Bank of England base rate is 2.25%, and first-time buyers can get a mortgage at 6.0% fixed for two years, but early in November the base rate will go up 100 points, or perhaps 150 points, to 3.25% or 3.75%.

We know this as the Governor of the Bank of England Andrew Bailey has already flagged this, saying: “As things stand today, my guess is that inflationary pressures will require a stronger response than perhaps we thought in August.”

This would increase to a two-year fixed rate of 7.25% to 7.75%, which would lock out potentially 350,000 plus buyers from the housing market. This would decimate the new home builders, and the residential marketplace as first-time buyers underpin the chains when second steppers look to move.

For the seven million people who already have a mortgage, or specifically the 100,000 plus who each month may be coming out of a fixed rate mortgage deal that was under 2%, the new fixed rate deals at 10%, which is five times higher, will be a huge wake-up call.

Having been an agent from the mid-1980s I have seen many boom and bust housing cycles, usually sparked by Chancellors tinkering with taxation ploys around housing, from Lawson in 1988 through to the folly of Rishi Sunak’s giveaways.

In my view, having marketed over 18,000 properties in 30 years, the nation sits on its hands when it has no cash in its pocket, and if your mortgage repayments increase by £600 a month, the last thing you think about is buying another home…you just hunker down.

The knock-on effect is obvious too. In the lettings sector, tenants will be paying higher rents, as landlords hit by increased financing costs pass these costs on. And with many landlords exiting the market, the PRS will be squeezed with a supply problem further compounding a rise in rents.

A lot of it hinges on the fortunes of Liz Truss and the next fortnight. A coup seems most likely, but even if she stays the money markets are going to react negatively to her new austerity Chancellor.

Each week I get to talk to around twenty agencies, some small some large, and during the confusion of the last seven days, some clear patterns are emerging.

First, all agencies are scrambling to get as many sales as possible across the exchange finishing line, typically one-third of their sold subject to contract pipeline gets exchanged every month. But due to the lending turmoil and market uncertainty, getting buyers to do the deal has become far more complex.

Some first-time buyers have just pulled out, waiting to see if house prices will fall, and many chains are seeing renegotiations of sale prices, caused by down-valuations or buyers wanting a ‘discount’ to do the deal.

There has been a flurry of new property coming to the market, with some vendors clearly realising that 2023 will probably be a very sticky market, and thus they are looking to move while they can. Agents also tell me that this new inventory is coming on at strong money, so will not sell quickly.

In fact, with the cost of borrowing rising and homes being listed at super high values, many agents say there is a Mexican standoff as the market decides whether it is a buyer’s or seller’s market. The paucity of instructions has given vendors the whip-hand for most of 2022 until they become a buyer and have to pay full money on their next purchase. Now it seems that buyers may well have the power moving into the last quarter of 2022.

Letting agents are saying that rents are continuing to climb, stock levels of new tenancies are hard to find, and most of the activity is existing landlords reletting their property, with a number of landlords concerned over the section 21 legislation which may or may not be on the cards. Truss is saying section 21 will be repealed, but will she even be prime minister in a few weeks, and if not what might a new prime minister think?

Covid is also factoring into the property world again. With 1 in 35 now contracting Covid, some agents are again locking the door to their branches to minimise risk and facemasks are making a return to some viewings.

The biggest concern that agents are expressing is by far and away the new calm that seems to be enveloping the market. October is typically the month when the housing market starts to seasonally slow, but the fear of many agents is that by January interest rates may have risen so much that the whole market stagnates.

As one agent put it, people always want to move, but if the cost to move becomes too great, only those who have to will actually do so.

The agent went on to say that new enquiries were slowing and there was definitely a feeling that the tap was being turned off. They also said that they thought in 2023 it would take longer to agree on sales as buyers would become pickier, sensitive to the much larger loans that would need to service to buy their next home.

Andrew Stanton

CEO & Founder Proptech-PR. Proptech Real Estate Influencer, Executive Editor of Estate Agent Networking. Leading PR consultancy in Proptech & Real Estate.

You May Also Enjoy

Breaking News

Modern rental properties command premium of 18%

New data analysis by FCC Paragon reveals that renters who want to enjoy the many benefits of living in a modern property are facing a rent price premium of up to 18%. Modern homes come with a number of benefits, including increased energy efficiency for lower household bills, less chance of experiencing frustrating maintenance issues,…
Read More
Estate Agent Talk

The Ultimate Guide to Selling Your Home: Smart Pricing, Stylish Upgrades, and Strategic Marketing

Selling a home is more than listing it online and waiting for offers—it’s about crafting a compelling narrative that captures buyers’ interest and motivates them to act. From pricing strategies to final staging touches, this article breaks down advanced, actionable tactics that help homes sell faster and for a higher price. Let’s explore how you…
Read More
Breaking News

Prime London property values slide by as much as 60%

The latest market analysis by prime London property brokerage, Jefferies London, has revealed that sold prices across some of prime London’s most popular neighbourhoods have fallen by as much as 60% so far this year when compared to the same period in 2024. Jefferies London analysed sold price records from the Land Registry, looking at…
Read More
Breaking News

Can’t afford London? These cities are giving investors more for less

New data has revealed that between four and ten of all buy-to-let purchases made in the first four months of 2025 took place in the Midlands and the North of England. With affordability scarcer than ever in the South, property investors are turning their attention to greener pastures… literally. So, what’s driving the shift up…
Read More
Breaking News

£19m per month for the nation’s most prestigious property

The latest research by award winning mortgage adviser, Alexander Hall, has revealed that whilst a property close to Royal Ascot will see the average homebuyer pay £4,263 a month in mortgage costs, this monthly payment climbs as high as £19m a month for those with ambitions of snagging a real royal property. This week, Royal…
Read More
Breaking News

Glenigan Summer Forecast: Boom Times Ahead For UK Construction

Construction intelligence specialists predict major performance uptick over the next three years. UK construction sector set to grow 24% over the forecast period Private housebuilding is set to increase significantly, with an 18% activity increase predicted in 2027 Industrial & Commercial gradually strengthens as UK economic growth gathers pace, supported by increased business investment Increased…
Read More