Nationwide House Price Index: “Obscene rise in energy bills is something that needs to be proactively addressed by lenders” – reaction

by | Sep 1, 2022

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Following the Nationwide August House Price Index published this morning industry experts have reacted.

Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com: “Economic conditions continue to deteriorate and more rate rises are almost certainly on the cards so the days of double digit price growth will soon draw to a close. The obscene rise in energy bills is something that needs to be proactively addressed by lenders as the current batch of green mortgages are little more than a gimmick. Using personalised data to target individual properties, we’re currently working with a variety of high street and specialist lenders with a view to embedding energy-efficiency measures into people’s mortgages where applicable. It’s in the interest of both the homeowner who will pay cheaper bills and the lender, as energy-efficient homes will retain value and also mean borrowers are less likely to default due to astronomical energy prices. Now is the time for the mortgage industry to go green in earnest rather than continue along the current path of lightly packaged and largely token green products.”

Mike Staton, director of Mansfield-based Staton Mortgages: “August is usually a relatively quiet month in the mortgage and property market, but this time round there were no signs of a dip in activity, with first-time buyers especially active. It may be that people are keen to buy, lock into a low rate and batten down the hatches before we enter a time of potentially extreme economic turbulence. Although we are starting to see a reduction in the level of competition to buy houses, it remains a sellers’ market for now as there are still more than enough buyers out there despite the cost of living crisis.”

Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions“Though the property market remains in a relatively healthy state for now, there’s nowhere near the frenzied activity that has defined the market during the past couple of years. We’re typically now seeing just two or three buyers competing for a property rather than two dozen, as was the case this time last year. In some instances, some old-fashioned negotiation between a single buyer and seller is now making a comeback. While there is still a general lack of supply, sellers’ expectations are also becoming more reasonable and generally more in line with valuations. The current flattening in the market and greater equilibrium between buyers and sellers is a good thing and in the past month I have had several clients make successful offers after some had been looking and offering unsuccessfully for over two years. Unlike the Global Financial Crisis of 2007/08, arguably the most important element of the housing market is that it remains fluid and functional so while prices may stagnate or fall slightly due to the cost of living crisis, I am confident that demand will remain and transactions will continue, albeit at lower levels than the past two years.”

Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco: “It’s frankly mind-blowing that annual house price growth is still in double digits. However, with inflation and energy bills set to rise into the stratosphere, and rates also set to increase further, the property market will soon come back down to earth. Increased borrowing costs and the immense pressure on household finances due to skyrocketing energy bills will almost certainly start to temper demand in the months ahead. The one constant in these times of extreme flux, of course, is the lack of supply and homes being built. The abject lack of good quality, affordable housing will support prices even as we go through an unprecedented cost of living crisis.”

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: The UK still suffers from a massive housing shortage and until this fundamental and difficult issue is addressed, then house prices will always be high in comparison to wages. That said, a slowing economy and forthcoming recession will dampen the market significantly with many prospective buyers put off by higher interest rates and utility costs. However, I don’t expect to see prices decline like they did after the Global Financial Crisis. Under normal circumstances, this should now be turning into a buyers’ market, but after the amount homeowners have spent on their properties and the costs associated with that, I expect they will hold out for near asking prices and sit and wait if they don’t attain this. This is why I expect prices to hold up, but transaction levels to sink like a brick.”

Edward Checkley, managing director of London-based property finance specialists, Advias:August has been consistent with most of 2022, with people transacting against a backdrop of rate hikes, slow conveyancing and drawn-out lender processing. Buyers looking for the right property are still looking and taking the view that a mid-3% mortgage rate is still good in terms of longer-term averages. Investors are certainly reappraising their strategies as limited company rates are typically north of 4%, with some tipping into the 5% space. We have certainly noticed a slowdown from overseas buyers who face a double surcharge cost in stamp duty and less attractive interest rates to offset this cost. We believe that house price growth will level out from here, with the lack of housing supply keeping a decline at bay from the inevitable economic jitters and the cost of living crisis.”

Michael Aldridge, director of Bath and Chippenham-based Lucra Mortgages“Despite the growing number of doom and gloom prophecies, the housing market continues to defy logic and house prices continue to boom. Some analysts predicted the property market would be on its knees by now but despite an apparent perfect storm it still remains very buoyant. Without doubt, the squeeze on household spending will start to have an impact on demand and, in turn, prices, but several factors are counterbalancing this. Housing stock remains very low, employment levels very high and though interest rates are rising, they are still at historically low levels. Though the rate of price growth will almost certainly start to cool, I just can’t see a crash.”

Charles Yuille, managing director of Bath-based Willow Brook Mortgages: “With inflation going through the roof and energy bills set to hit terrifying heights, a moderation in the rate of house price growth is now inevitable, but the egregious lack of stock will prevent any material drop in house prices. The cost of living crisis is definitely hitting wallets and confidence hard but for now the employment market remains strong. As long as people have jobs, there will be demand for property. If jobs start to go at scale, that’s when we could see prices fall.”

Rhys Schofield, Managing Director at Peak Mortgages and Protection“I have never known a busier August. We saw the usual summer slowdown in purchase work as there wasn’t much new stock coming to market but this is an annual event and estate agents are very busy with new properties hitting in September. It’s still very much a sellers’ market, though, with demand outstripping supply. What kept us really busy though was remortgage work with customers wanting a new fixed rate to protect against rate rises. Remortgage enquiries through our website were up 227% in August on the previous month alone.”

Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: “August was busy, with lots of enquiries from clients looking to remortgage. There’s a real sense of urgency now after the recent 0.5% hike in the Bank of England base rate. The market is definitely turning in favour of buyers, who are wary of paying over the odds now mortgages, energy and the price of everything else is going through the roof. Unless Truss or Sunak can pull several rabbits out the hat, I don’t see anywhere else for house prices to go but down.”

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages: August is naturally the holiday season, with children off school so it’s unusual to see a downturn in activity levels as families are on holiday or entertaining their children, with paperwork and property at the back of their minds. In our eyes, it’s too early to tell if the market is changing until further data for September and October become available. However, we will say while stock levels remain as low as they are, it’s hard to back the idea that house prices will drop across the UK.”

Jamie Thompson of Manchester-based Jamie Thompson Mortgages: “August was the busiest month on record for my business, by some 30% more than the second best ever month. First-time buyers remain out in force and some customers are returning earlier than anticipated for remortgage reviews, willing to pay penalties now to secure today’s rates in case of further interest rate raises. I think this is common across the industry at the moment if lenders service levels are anything to go by. I’ve seen more borrowers revising down the purchase price they are looking at in some cases. This means that those who were looking to purchase for around £300,000 a few months ago are now considering smaller, more energy-efficient homes around £200k. Paradoxically this could mean more people competing for properties at lower price points, increasing the prices at the lower end of the ladder more than the higher, making it yet harder still for first time buyers without access to the Bank of Mum and Dad. There’s no one market for housing in the UK. It varies by location and property type and size so different buyers and sellers can go through completely different experiences depending on their circumstances.”

Dominik Lipnicki, director of Your Mortgage Decisions: “August proved to be a busy month, especially on the remortgage front with borrowers keen to fix their mortgage rate. So far, the housing market has remained strong but house price increases are likely to dampen as the cost of living crisis bites. Without a doubt, we face an uncertain future with some predicting mortgage rates unseen for well over a decade.”

Scott Taylor-Barr of Shropshire-based broker, Carl Summers Financial Services: We’re entering uncharted waters in terms of the economy, so how things play out ultimately is as much luck as judgment. I’ve personally seen a noticeable reduction in the number of enquiries coming in for people looking at buying property, but many people are keener than ever to review their existing mortgage, so activity is still at the same level in the mortgage market overall. The shift away from property purchase will no doubt have an impact on house price growth, maybe even stalling it completely for a period, but I can’t see any widespread falls in house prices as long as mortgages are still available to the majority of potential buyers. If mortgage lenders for some reason constrict mortgage availability, then that may have a negative effect on house prices, as only those with excellent credit scores and larger deposits will be in a position to buy.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services: “August has been off the charts for new applications, whether it’s people moving home, first-time buyers or people wanting to remortgage; it’s been the best month so far this year, which is odd as August is typically one of the quieter months. However, we’re noticing a significant change with landlords looking to sell up, giving tenants first refusal. This is off the back of rates rising, EPC changes coming down the tracks on top of the landlords no longer getting an interest rate tax relief. Essentially it’s squeezing landlords’ margins, and we’ve seen a massive increase in those types of enquires from renters hoping to buy from their landlords. The tide is certainly turning from what’s been a seller’s dictatorship into a buyer’s paradise. As long as the Bank of England doesn’t do anything too drastic, the wheels should stay on the property market and hopefully, the government can do something about the energy crisis. In short, don’t bet against the housing market too soon.”

Rob Peters, director of Altrincham-based Simple Fast Mortgage: “Usually August disappoints, but not this year as new mortgage business levels have been through the roof. A solid mix of first-time buyers, remortgages, and buy-to-let applications has seen us through one of our best months ever. If anything, it’s the seasoned investors who are sitting on the sidelines waiting to see if the economic environment will provide a key opportunity. Our view is it remains a sellers market and that it’s going to take some some serious economic pressures to slow down the property market machine.”

Imogen Sporle, Head of Term Finance at London-based broker, Finanze“Although we have a cost of living crisis which would usually bring the market down, this has been counteracted by so many people rushing to buy now to avoid the higher rates which are being predicted for the end of the year and 2023. I do think price growth will slow however but in comparison to the massive boom we have had in the past two years I do not think this is anything to worry about. I do think the lack of stock will help support prices.”

Nicky Stevenson, Managing Director at national estate agent group Fine & Country, said: “Price gains continue to soften amid a squeeze on living standards and a decline in buyer affordability. Underlying demand remains robust though spiking energy bills and increased borrowing costs are having a gradual cooling effect which is expected to become more pronounced later in the year. While the pace of growth is no longer accelerating, demand continues to outstrip supply throughout most of the country and the desire to trade-up among existing homeowners remains strong. Ten successive months of double digit growth is remarkable, but we expect momentum to soften as recession looms larger.”

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