The Winners and Losers of an Ever-changing Property Market

New year, new home. At least that’s what most of us were hoping for. Economic uncertainty however has had other plans for house buyers at the tail end of 2022. In 2022 we saw an all-time high in the price of mortgage rates with many homeowners finding themselves struggling to pay their new monthly fee and many buyers unable to get a mortgage at all.

It’s fair to say there have been far more losers in the property market than winners over the past six months. However, a window of opportunity has presented itself as of late. In contrast to the ever-changing mortgage rates that have become the norm in recent times, rates have fallen and as a result of this restrictions regarding affordability have eased. The main reason for the fall in rates can be summed up in one word – stability.

Despite longer-term uncertainty over the UK’s economic situation remaining prevalent, shorter-term prospects have been improved on the back of The Bank of England’s suggestion that interest rates may not increase as much as initially anticipated within public publications. On the back of this newfound optimism, the increased stability of the markets had a positive effect for lenders. Many lenders, who withdrew products at record rates upon initial Bank of England intervention, have felt more comfortable offering fixed-rate mortgages again. This increased competition within the market has had a positive impact on rates. Additionally, the stability has resulted in lenders being more comfortable with offering better fixed rates deals as a whole, particularly on fixed rates of five years and up.

Given the struggles that many potential buyers have had with increasing rates over recent times, it is important to note that whilst the increased affordability now available to buyers will help many people who may not have been in a position to purchase only a few months ago, the elephant in the room remains – house prices. Whilst there has been a slight decline in prices, house prices are still as high as ever in realistic terms and a slight drop in interest rates may do little to convince people to act on their increased affordability in the short term given the potential of a further decline in prices into later 2023.

All in all, many people will be asking the famous old question of ‘is now the right time to buy?’ given they may unexpectedly be in a position to buy. Ultimately, there is no right or wrong answer to this question. Whilst house prices are set to drop further into 2023, it is quite plausible that interest rates may increase higher than expected, at which point affordability may become a problem for potential buyers again. Given many of the inflationary measures present in driving interest rates are external factors, this is still a realistic outlook. When taking all this into consideration, buyers acting on their increased affordability may not be such a bad move.

What do you think? Let us know in the comment below!