House prices fall for the first time since 2020

Key ring in the shape of a house hanging from a key in a lock

House prices have fallen for the first time since June 2020 by 0.9%. This is the first monthly decline we’ve seen since July 2021 and the largest decrease since June 2020.

In recent months, we’ve seen house price growth beginning to slow, from 9.5% in September to 7.2% in October according to Nationwide, due to the increase in interest rates following the government’s mini-budget.

“The market has undoubtedly been impacted by the turmoil following the mini-budget, which led to a sharp rise in market interest rates,”

Robert Gardner, Nationwide’s chief economist.

The rise in interest and mortgage rates has affected the demand for houses, and when combined with the high cost of living, affordability for many home buyers is dwindling. And although rates for 2-year and 5-year fixed mortgages have now decreased below the 6% mark, they are still considerably higher than this time six months ago.

This comes after a period of uncertainty across the UK in the housing market: the BBC recently reported that first-time buyers could struggle to get onto the property ladder due to fewer mortgage deals with smaller deposits being made available by lenders. They reported that figures show there were 137 mortgage offers at 95% loan-to-value on Monday, compared to 347 at the start of 2022.

What does this mean for me?

We spoke to Key Solutions Mortgages Managing Director Michael Thompson about what this means for those looking to buy a home or remortgage their property:

We expect this to be the beginning of the housing market slowing in the coming months and through 2023. Inflation is likely to stay high for some months and the base rate is likely to increase more, but from what we can see from the changing of these figures, the period of significantly rising house prices appears to be coming to an end. Whether house-price rises slow, stop, or reverse completely is still up for debate.

Off the back of the ever-changing housing market, we are regularly being asked if now is the right time to purchase a property. With rates and prices fluctuating month on month, we understand how wrapping your head around the market and figuring out whether to buy can be confusing.

Is now a good time to buy a house?

There is no right or wrong answer to this and it opens up the debate between ‘time’ and ‘timing’. The only real answer to this question is: have you found a property you love and can you afford the monthly mortgage payments?

A typical mortgage term lasts between 25 and 35 years and over that lifetime you will see fluctuations between low and high rates. Yes, we are experiencing higher interest rates than we have seen in the last 3-4 years, but these are not unusual in mortgage lending; in fact the sub 1% interest rates we saw last year were artificially low.

It therefore doesn’t matter when you enter the property market. Over the lifetime of your mortgage you will experience both low and high interest rates and you’ll actually find these costs will average out over time.

During any mortgage term, you will experience periods where property values rise and fall. The value of your property is only really relevant when you plan to sell it. If you purchase your first property with the smallest possible deposit of 5%, if property prices fall immediately after, you could find yourself in a position called negative equity.

Negative equity is where the balance of your mortgage is higher than the value of your home, meaning you have no available equity in the property. However it’s worth bearing in mind this is only an issue if you want to sell.

This is what we mean by ‘time’ vs ‘timing’ – it’s less about when you buy the property and more about how long you plan to own it. If you own it long enough, these fluctuations will average out.

We will continue to monitor the market and provide the best advice possible to all our customers. We’re aware that across the UK at least 100,000 people a month are coming to the end of their fixed-rate mortgage, and could face steep rises in monthly repayments. If you’re considering remortgaging your property, please contact us as soon as you can.

Our phone lines and emails are always open for any questions or concerns you may have, and our team is always on hand to offer no-nonsense support.

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About Key Solutions

Here at Key Solutions we believe taking out a mortgage should be easy. Why shouldn’t it? So when people say buying a home or getting a mortgage is one of the most stressful things ever, we say, come and speak to us.

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