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Home » Falling house prices, rising mortgage rates!

Falling house prices, rising mortgage rates!

Ciarán Power
September 30, 2022
Key in the lock of a door

Table Of Contents

UK house prices are expected to fall by at least 10% in 2023, with mortgage lenders pulling deals and property experts predicting interest payments to rise to levels not seen since the 2008 financial crisis.

Whilst on the surface, this news could sound promising – seeing sky-high property prices fall and our dream homes becoming more affordable – the knock-on effects of rising mortgage payment costs potentially pose great problems to those looking to get a foot onto the housing ladder.

How have house prices changed?

House price data from Zoopla states that a typical UK home now costs £258,100 compared with £256,900 in July, however this drop alongside the latest budget announcements has thrown a major spanner in the works and impacted the cost of both new and existing mortgage plans.

Hundreds of mortgage deals have already been withdrawn by banks and building societies since the Government’s latest budget statements, with average mortgage rates forecasted to exceed 6% in the first half of next year as the Bank of England raises interest rates more aggressively to address the market turmoil in the wake of chancellor Kwasi Kwarteng’s tax-slashing “mini-budget” announced last week.

What are the effects of the budget announcement?

This budget announcement consequently resulted in a steep drop in the value of the pound, and has had a significant impact on borrowing costs for potential buyers – reducing how much they can pay for properties. Some lenders have already temporarily stopped selling mortgages to new customers, with many others ramping up repayment rates for new loans making new mortgages unaffordable for many others.

Some popular and well-known UK mortgage lenders have suspended new deal negotiations for up to a week due to repricing attempts. Analysts have said that once lending resumes, borrowers could face much higher costs at a time when inflation is eating into budgets and the prospect of a recession looms – ultimately and potentially triggering a housing market crash.

On top of this, recent government statistics found that just under two thirds of over 24 million homes across the UK were owner-occupied, with 8.8 million homes owned outright and 6.8 million owned with a mortgage or a loan, further contributing to the bursting of the housing bubble.

What does this mean for mortgage borrowers?

More than 2 million mortgage borrowers with fixed-term agreements will need to remortgage between now and the end of 2024, according to Bank of England data. Buyers who stretched their budgets when rates were low may simply not be able to cover the higher costs. Please reach out to our dedicated Green team who can help guide you through things and help you save as much money as possible before any further changes come into pay!

If you have any concerns about how these issues might affect your current or future mortgage deal, please reach out to our passionate and expert team of advisors who are always happy to provide straight-forward, honest and specialist advice.

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