Following the UK House Price Index just published by the ONS, industry experts have shared their reaction with IFA Magazine.
Jonathan Hopper, CEO of Garrington Property Finders, comments: “There’s always a touch of the oil tanker turning in the official house price data, but the speed and scale of the downturn is now impossible to ignore. In the space of just 12 months, the annual pace of price rises has plunged from 13.8% to just 0.6%.
“It’s now only a matter of time before the index slips into negative territory, as on the property front line we’re regularly seeing homes sell for tens of thousands below asking price as proceedable buyers find themselves holding all the cards.
“Even the most optimistic sellers are having to accept that this is unequivocally a buyer’s market, albeit one in which the rising cost of borrowing has prompted many credit-reliant buyers to pare back their budgets or pause their moving plans. Nevertheless there are two things to cheer as prices continue to slide. The first is that even as each passing month sees thousands of existing homeowners endure a painful jump in their mortgage costs, there’s no sign of the wave of distressed sales seen a decade and half ago.
“The second is that while some property types – typically new-builds in areas with lots of supply – are seeing prices plunge, average price falls remain relatively modest. This is still a correction, not a collapse. We haven’t yet reached the tipping point where prices have fallen far enough to cancel out the impact of more expensive mortgages and strict affordability criteria. For now, those who need and want to move are still doing so, albeit with a healthy dose of caution and while factoring price risk and higher borrowing costs into what they’re prepared to pay for a property.”
Richard Harrison, Head of Mortgages, Atom bank said: “Today’s data shows house prices are rising more slowly, with an annual increase of 0.6%. This change was somewhat anticipated when you consider the sharp rise in borrowing costs customers have faced over the summer months, which has led to purchasing activity falling considerably below the levels seen last year. This is particularly true of London, which has seen house prices fall by 0.8% annually as customers face greater affordability challenges in the capital.
“Most commentators expect prices to remain suppressed over the short-term, but do not expect to see double digit falls on the basis that employment levels perform as expected.
“Looking more positively at the situation, moderately lower house prices coupled with on-going growth in wages could improve affordability for prospective buyers. In addition, mortgage pricing has been falling during September and could continue with inflation dropping faster than expected. That being said, borrowers should still get used to higher rates, with the base rate expected to remain higher for longer.”
Iain McKenzie, CEO of The Guild of Property Professionals, comments: “Despite gloomy predictions, house price growth is still positive, and good news on inflation means that the market can be optimistic about autumn.
“Sellers may worry about the value of their home, but it’s important to remember that it‘s still worth much more than it was prior to the pandemic. Continuing buyer demand is helping hold up the market and keeping property prices buoyant in the face of challenging conditions.
“Today’s inflation figures will add to downward pressure on mortgage rates, offering a welcome respite to first-time buyers and those nearing the end of fixed deals. Autumn is typically a busy season for estate agents, and there’s a few glimmers of hope that the end of the year will see the market turn.”
Nicky Stevenson, Managing Director at national estate agent group Fine & Country said: “As high borrowing costs continue to squeeze buyer budgets, the knock-on effect for sellers is reduced asking prices and an overall dampening effect on house price growth.
“The housing market is proving to be more resilient than expected, as buyers adapt to higher lending rates and sellers price their properties accordingly. But these latest house price figures come a day before the Bank of England is predicted to raise its borrowing rates for the 15th consecutive time, as it continues to grapple with stubbornly high inflation.
“Figures today reveal that UK inflation fell in August, potentially reducing the pressure on the Bank of England to raise interest rates, but the figure is still three times above the 2% target. Those considering a move will certainly be keeping a close eye on the announcement tomorrow, and its effect on mortgage rates.
“Lenders have been slashing borrowing rates as they compete for business, and they should have already factored in an expected 15th successive base rate rise. If borrowing costs remain steady, or even continue to fall, then confidence should remain strong. The Bank of England base rate is expected to reach its peak, offering some relief, especially for first-time buyers, while also helping to maintain demand and keep the housing market steady.”
Arjan Verbeek, Founder & CEO of Perenna said:“While we’re seeing house price growth slow, it does not solve the underlying problem preventing many buyers from stepping onto the housing ladder. UK house prices are still significantly higher than the current income multiples offered by most high-street lenders, which average between four to five times more than an individual’s annual salary. However, according to ONS, house prices are currently 8.3 times higher than average annual earnings.
“This income limit is due to several factors, yet the UK’s reliance on short-term fixes is part of this problem due to how risk affordability is calculated by lenders. If risk is mitigated away more from borrowers, and lenders know what homeowners will continually pay in 10, 15 or even 20 years’, this could open up affordability significantly and ultimately allow many more to buy a home.
“European counterparts such as Denmark rely on mortgage banking models which are long-term, fairly priced, and create an affordable housing market. As macro-economic volatility continues, the benefits of long-term fixed rate mortgages are clear.”
Paul Glynn, CEO at Air, said: “It is unsurprising to see a slight slowdown in market activity this month and a dip in house price growth as the cost-of-living crisis continues to strain consumer purchasing power. However, it is important to remember the resilience the market has demonstrated over the last few years when met by economic challenges.
“As borrowers navigate these currently unfavorable conditions, it is crucial that advisers are on hand to offer their support and are well versed in the various options available. Access to the necessary tools and resources will help advisers deliver well-tailored guidance to help them find the best possible outcomes for their customers.”
Ben Waugh, Managing Director at more2life, said: “As the ongoing cost of living crisis squeezes borrower incomes, it’s not hugely surprising that activity in the mortgage market is slowing down. The UK housing market is resilient enough to stay the course in choppy waters, but the consecutive increases in the base rate have created a downward pressure on prices, although they are higher than this time last year.
“For older borrowers facing increasing mortgage repayments ahead of retirement, the current economic turmoil may provide a reasonable motivation to reassess their financial options. Times are challenging, especially for those who are considering whether their pension will be enough to support them. For the over-55s, seeking expert independent advice could offer actionable solutions and more importantly, some much deserved peace of mind.”
Malcolm Webb, Technical Director, Legal & General Surveying Services, comments: “While the cost-of-living crisis means affordability remains an issue, a quieter market and more subdued house price growth will make the challenge of coming up with a deposit and finding a new home less of a hurdle for some, particularly first-time buyers. This demand from those looking to step onto the ladder can be seen in the ever-growing popularity of the Bank of Family, which this year is the busiest it’s ever been, playing a role in nearly 320,000 housing transactions.
“More support is needed for those who can’t rely on the generosity of family or friends, but for people looking to make their first step into homeownership, or even their next move, it’s important they get the right support from market experts including mortgage advisers and surveyors. Buying a home is often the single most expensive purchase someone makes.
“A surveyor will be able to identify any potential issues with the building and flag areas that need significant repairs. This isn’t just about giving peace of mind to buyers, and the family members supporting them, that they are investing in a sound choice of property, but it can even give them critical information to help renegotiate with vendors and ensure they are paying a fair price.”