Nationwide September HPI – “In the property market, it is officially now business as unusual” – reaction

by | Sep 30, 2022

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Following the Nationwide September House Price Index published this morning, mortgage and property experts have commented.

Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco: “The days of double-digit growth may not return for a long time. The level of uncertainty in markets, and being felt by consumers, is off the charts. The brief surge in sentiment caused by the stamp duty announcement on Friday has been wiped out by the tsunami of market volatility since. There’s no doubt now that a lot of prospective buyers will either have to look at smaller homes due to the sharply increased mortgage rates they are now looking at, or will shelve their plans altogether and wait until there is more clarity and things have calmed down. Prices will without doubt come under real pressure now, but the sizeable drops some have predicted are unrealistic given the lack of supply. Prices are far more likely to flatline than go through the floor. What we can all agree on is that the age of dirt cheap money is well and truly over.”

Gaurav Shukla, mortgage adviser at London-based broker, Home Me“Although rates increased at the beginning of September, they were still affordable for most customers so it was business as usual. It is no longer business as usual. In fact, in the property market, it is officially now business as unusual. Many first-time buyers will now put buying a property on hold, as the level of interest rates will push them out of affordability, especially with household bills due to increase in October. They are contemplating whether now really is the right time to buy. There is extraordinary uncertainty among the UK’s leading lenders and a lack of confidence across the board after the mini-Budget last week. With the Bank of England this week effectively bailing out the Government for their mini-Budget, it further demonstrates the lack of economic knowledge that Liz Truss and Kwasi Kwarteng have. Expect the Bank of England to continue to raise the base rate over the coming months and into 2023, with rates reaching their peak around the second or third quarters of next year. I expect house prices to drop over the coming year, with a much needed market correction. Demand will naturally decrease as only those who can afford mortgage payments at 6% interest rates will be able to proceed.”

Ross Boyd, founder of the always-on mortgage comparison platform, Dashly.com“We should get used to single digit price growth, potentially very low single digits and even negative. After the chaos of the past week, the level of uncertainty in the property market is off the scale. It’s like 2008 all over again. More rate rises, and potentially very sharp ones, are now almost certain, and that will further temper demand for property, putting prices under real pressure. For people who are currently locked into some of the lowest mortgage rates ever, the rate shock when they remortgage will be extreme. The pending remortgage crunch will significantly add to the cost of living crisis and put further pressure on household finances. We are heading into a brutal winter, with confidence among buyers and sellers alike at its lowest level since the Credit Crunch.”

Ian Hewett, founder of Ashford-based The Bearded Mortgage Broker: “Despite all the madness of the past week, I don’t think we will see a property market crash. The reason is simple: the sheer lack of supply. Yes, mortgage rates have increased dramatically, and energy bills are set to soar, so affordability is going to be a challenge. However, the extreme lack of stock will likely prevent a crash even if demand drops off sharply. Many first-time buyers will still want to get out of the rental market, where rents are skyrocketing.”

Paul Neal of Derbyshire-based Missing Element Mortgage Services“It’s utter carnage out there right now. The wheels are coming off the mortgage market, and the property market as a result. Lenders are still withdrawing products, leaving brokers unsure when they will actually open again. Without mortgages, the property market could go pop. Many of our clients are in a Mexican stand-off between pulling the trigger on a property transaction and fleeing the market altogether. So many are unsure about whether to proceed. We have a mixture of clients who are rushing to get their applications in, and others standing off and waiting to see what the future holds. It’s impossible to know where prices will be in a year’s time. All we know is that there is a ridiculous amount of uncertainty thanks to last week’s mini-Budget.”

Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: “The events of the past week have fundamentally changed the mortgage market. I think we’re at the point where borrowers have started to realise house prices are likely to fall. The new norm over the coming weeks will be mortgage rates well over 5%, possibly 6%-8% by the new year. If no one can afford to buy at current prices, a lack of housing stock won’t make a jot of difference, despite what estate agents say to the contrary. Unless we are very lucky and inflation falls much more quickly than predicted, I don’t see any other outcome than a sizeable fall in house prices, possibly 20%+ over the next 2-3 years. The worm has turned. It’s a buyer’s market now.”

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: “The stamp duty cut now pales into insignificance compared to the massive rise in borrowing rates. The naivety of some sellers to try and renegotiate prices upwards following that announcement will have left them with no buyers and nowhere to go. The housing market is soon set to dry up completely. It’s not interest rates doing this, but confidence in the economy and those running it.”

Scott Taylor-Barr, financial adviser at Shropshire-based Carl Summers Financial Services: “The UK housing market is vastly undersupplied and so a fall in prices can really only be triggered by a couple of things: someone building and then releasing a million homes onto the market all in one go, or lenders withdrawing mortgages meaning that only cash buyers, or those with really big deposits, can purchase. I’m not aware of anyone secretly building a million houses, but the second one is scarily looking like becoming a reality. Our hope is that markets settle quickly and lenders return with their full, albeit higher priced, product ranges soon. If not, the housing market is looking extremely vulnerable.”

Joe Garner, managing director at London-based property developer, NewPlace: “In some areas there will very possibly be a crash, in others prices will stabilise, and in other areas still prices could increase. The type of property will also play a role in how it fares in the weeks and months ahead. While owner-occupied property prices are likely to fall due to the reduced availability of mortgages and liquidity, we will likely see a big shift upwards in the value of rental accommodation. People still need somewhere to live, and if they can’t buy, they have to rent. If the demand for rental properties increases then so do the rental payments, which in turn increases the yield, resulting in an uplift in the value of the rented property. As mortgage products come to an end, it appears to me that homeowners have two choices. They move onto a new product with the same lender and suffer the inevitable increase in payments or they sell out at below market value and move into rented accommodation.”

Michael Webb, Managing Director at Brandon-based Mortgage Republic: “Most people were expecting the next interest rate increase to happen at the scheduled November meeting, but it may come sooner than that, potentially this week or next. If an emergency rate rise does occur, it will be an enormous shock for many borrowers and could hit property market sentiment hard. The property market is facing a phenomenal level of uncertainty.”

Michael O’Brien, managing director at Romford-based Home of Mortgages“The market is not in the grave position it was back in 2008 yet. For now at least, first-time buyers can still purchase with a 5% deposit. There’s no doubt that the cost of borrowing is increasing, however, faced with the alternative, namely the ever-increasing cost of renting, a mortgage is still a more comfortable alternative. That will likely support prices as people will still want to exit the rental market wherever possible.”

James Miles, director of Exeter-based broker, The Mortgage Quarter: “The pressure cooker is about to pop. We’re seeing borrowers strongly re-evaluate their lending options and demand will almost certainly start to weaken. If demand drops then prices, or at least the rate of price growth, will too.”

Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions: “September 2022 could turn out to be a significant turning point in the housing market cycle and it’s hard to now envisage anything other than a significant downturn in prices. Early indications are that, with confidence severely dented by the chaotic events of the past week, many people will now choose to sit on their hands for the next six months or so and wait for things to settle down. There is no question that for some would-be buyers, in particular first time buyers, the rise in the cost of the mortgages that remain, along with the associated affordability challenges, will prove too much of a hurdle. For those, however, with reasonable deposits and strong incomes, a likely drop in house prices and fall in competition from other buyers could in fact be the opportunity they have been waiting for. Those opting to view from the sidelines will also feel the pain, as the cost of renting is also likely to surge as demand in this sector will continue to far outstrip supply.”

Mark Robinson, Managing Director of Southampton-based Albion Forest Mortgages: “Lenders are pulling their products left, right and centre because they have no idea what is going to happen with interest rates. In the Bank of England versus Truss war, borrowers and homeowners are caught in the crossfire. I am hopeful that in a week or two we will have a clearer idea of what is going on. Hopefully the Bank of England will make a proper statement and then we will all know where we stand, lenders included. But the property market will be tested like never before in the weeks and months ahead.”

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages“People who were considering moving just a fortnight or so ago are now battening down the hatches while storm Truss unfolds. A growing number of our clients have come back to us after months of searching for a home and are putting their move on hold, in shock at how quickly rates have gone up. Their ideal home has now passed beyond a budget they feel comfortable with. What we are seeing is more and more clients approaching us about the best way to protect their finances by potentially securing a new mortgage now before rates rise further. The shift in confidence has been dramatic over the past week. I’ve never seen anything like it.

Manooch Suree, director at Uxbridge-based mortgage broker, Zinga Financial Servces: “Mortgage rates have never flashed so loudly on people’s radars. If rates were to rise again after an emergency meeting, it has the potential to bring the the purchase market to a grinding halt due to fears of what could happen next, which will invariably impact prices. We are in a highly fluid mortgage market now, with conditions changing by the day. People like certainty and there’s not much of that right now.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services: “We must remember we have a chronic housing shortage, and mortgage lenders want to lend. Those two things together are the opposite of what would predict a crash. Lenders are withdrawing rates because they don’t know how to price them accurately, not because they don’t want to lend. Will prices fall? Possibly. Will we see a crash? For all our sakes, let’s hope not.”

Rob Peters, director of Altrincham-based Simple Fast Mortgage: “Although rates rose in early September, the moderate increase in the cost of borrowing was overshadowed by buyer demand driven via a lack of housing stock. However, the mood soon changed when the Bank of England raised rates again and many first-time buyers found themselves falling off the affordability podium, shelving any aspirations they had of property ownership. Then when Truss and Kwarteng announced a package of growth stimulus via tax cuts, pandemonium ensued, in the mortgage, stock, currency and bond markets. Both the pound and gilt rates dropped through the floor. The result has been a mass exodus by mortgage lenders with almost all fixed rates mortgages withdrawn or significantly repriced. The market is now in limbo, with no clear sign of whether things will stabilise or head further south. Regardless of stock availability, there is a significant lack of confidence in the market. All bets are off.”

Marcus Wright, MD of independent mortgage broker, Bolton Business Finance“There could come a point at which increasing mortgage payments due to interest rate rises massively reduces demand for houses, which will clearly be bad news for property prices. We might not be there yet but what if rates go up another 1%, 2% or 3%? Higher interest rates on mortgages have the potential to significantly reduce demand among people up-sizing or moving, as well as property investors. Then, of course, a lot of people may not pass banks’ affordability checks, which means they can’t buy the homes they want. Higher rates could also increase supply, as more people sell up if they cannot afford their mortgage and we may possibly see an increase in repossessions. All of these factors mean we may well see a property crash.”

Nicky Stevenson, Managing Director at national estate agent group Fine & Country: “We know that a week is a long time in politics and perhaps the same could be said for the housing market. This data relates mainly to the period in September which came before last week’s mini-budget, and shows only a very modest slowdown in annual house price growth. In the coming weeks and months it is likely we will see a different picture emerging as interest rates accelerate faster than anyone anticipated against a backdrop of a sinking pound. Increased borrowing costs may well have the effect of wiping-out any cash savings that buyers hoped to make as a result of the stamp duty cut, while volatility in the mortgage market could delay transactions already in the pipeline. The other side of the coin is that sterling’s weakness is already making Prime London more attractive to overseas buyers. We know that the capital’s housing market does not always move in sync with the rest of the country, and we anticipate a spike in interest from foreign investors in the months ahead.”

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