The UK housing market is changing rapidly. In just a few weeks, we’ve gone from a booming property market to one gripped by fear.
Mortgage interest rates are rising by the day and many lenders have resorted to removing their most affordable mortgage products from the market altogether, making it more difficult to sell your house.
Those that have been replaced are much more expensive alternatives that have priced lots of would-be buyers out of the market. So, how will these changes impact someone looking to move house?
Price corrections
Those already tied up in a property sale may receive last minute requests to alter the sale price, as buyer’s borrowing capacity falls.
Those who have already locked in a low interest mortgage deal may still be willing to proceed, but speed will be of the essence as buyers race to get the sale completed before their current offer expires.
Buyers who have not yet begun their property search are likely to need to reduce their budget for their next home. Mortgages have suddenly become a lot more expensive, and this will undoubtedly have a strong impact on how much buyers are willing and able to pay for their next home, important to remember when you sell your house.
Everyone is nervous about how far property prices will fall, and few people will be willing to risk the potential of buying near the top of the market and falling into negative equity.
Fewer buyers
In the last couple of years, property prices have been growing because of an imbalance between the number of buyers and the number of properties available. Rising interest rates and inflation are having a big impact on buyer confidence, with many would-be buyers saying they have delayed their plans to move and now intend to stay where they are to ‘see out the storm’. At least in the short-term, this is likely to decrease the number of active buyers looking for a property. Fewer buyers will rebalance the market and result in downward pressure on property prices.
More failed sales
The mortgage market is changing on a daily basis. Many who have already secured an agreement in principle from their lender are now finding that they’re struggling to get the mortgage approved. This is because rising interest rates and higher repayments negatively impact their affordability assessments.
Those who have already secured a formal mortgage offer are finding it difficult to get an extension, should they need one. The process of buying and selling property in England and Wales is notoriously unpredictable and time consuming. It is currently taking an average of 5-6 months from having an offer accepted to completion of property sale. With a mortgage offer typically lasting for 3-6 months, it’s not unusual for a buyer to request an extension. In a stable economic climate, that’s usually simple and straight forward. In today’s market it can mean an increase in mortgage payments of more than 50% or an inability to secure a new mortgage deal at all.
The general feeling of caution in the market will also lead to buyers and sellers pulling out of deals voluntarily.
Home buying company Quick Move Now has released figures suggesting that 40% of property sales are falling through before completion. That’s a rise of 9% in just 3 months. The majority of failed sales are due to buyers getting cold feet or struggling to secure a mortgage. Many property experts are expecting these figures to grow in the coming months.
Danny Luke, Quick Move Now’s managing director, says: “If you’re currently in the process of selling your property, or are hoping to do so in the coming months, it’s important that you’re realistic about current market conditions.
“Buyer affordability means that we will undoubtedly see a drop in property values. You won’t achieve the same price for your property that you would have done a few months ago.
“If your property is not yet on the market, it’s important that you’re sensible about how much it might now achieve, and if you’re already involved in a property transaction you should be prepared for – and open to – last minute renegotiations to keep the sale on-track. It’s important to remember that although a fall in property prices can feel like bad news when you’re selling a property, the trend will be repeated throughout the market, and therefore whatever you go on to buy will also be cheaper.
Images courtesy of unsplash.com
