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Land Registry HPI for August: “A house price crash is now a fait accompli” say mortgage experts

by | Oct 19, 2022

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In response to the Land Registry house price data (August) published this morning, mortgage and property experts have shared their thoughts with IFA Magazine.

Joe Garner, managing director at London-based property developer, NewPlace: A house price crash is now a fait accompli. The only unknown is how hard and how fast the crash is. Only a few weeks ago, I was fairly confident the crash would be minimal, but then Liz Truss and Kwasi Kwarteng blew the mortgage, property and bond markets apart. We will now be lucky if we manage to get away with a 10% drop in prices. With inflation back in double digits, confidence among buyers has been shattered.”

Ross Boyd, founder of the always-on mortgage comparison platform,“Compared to August, the property market in October is in an alternate reality. The mini-Budget and chaos in the markets have blown the whole market apart. Confidence is in tatters. House prices could fall by up to 10% in the next six months, potentially more. The problem is cheap money, specifically the fact it no longer exists. With mortgage rates having shot up, the buying power and confidence people had just a few months ago no longer exists and prices can only go one way as a result, and that’s down. Prices will rebound as they always do, but it could take a few years for them to do so. It all depends on the length and depth of the recession that almost certainly lies ahead. For now, the immediate problem people are facing is the remortgage crunch. Speaking to a good mortgage broker to ensure you get the very best rate possible has never been more important. Though fixed rates are high, there are deals out that that are significantly lower than a lender’s standard variable rate.” 

Aaron Forster, director of Derby-based mortgage broker, Create Finance“With mortgage rates soaring, and inflation back into double digits, house prices will now come under real pressure. The market generally slows down in the closing stages of the year anyway as people’s attention switches to Christmas but this year that could happen earlier than usual due to the sheer economic and interest rate uncertainty. As mortgages become unaffordable, especially for landlords, there will be an increase in properties on the market, which will will apply downward pressure on prices. We may even see a raft of forced sales next year, adding to that pressure. With the cost of living also sky high, mortgage increases will be the final nail in the coffin for many people. Even with tax cuts and the new stamp duty regime, the savings these amount to will be minimal compared to the frightening jump in mortgage costs. If it’s not already, it will become a buyers’ market very soon.”


Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco: “There is unprecedented uncertainty right now. House prices are set to come under real pressure but the sizeable drops of 10%-15% that some are predicting are frankly unrealistic given the lack of supply. Prices are far more likely to flatline than go through the floor. If there’s one thing everyone can agree on, it’s that the age of dirt cheap money has been relegated to the dustbin of history.”

Rob Gill, managing director at mortgage broker Altura Mortgage Finance: “If mortgage rates remain at current levels, there’s every chance of a buyers’ strike as people calculate that their mortgage payments at 6% are higher than they’re willing and able to pay. The current imbalance between supply and demand could then flip completely and a substantial correction in house prices could be on the cards. Our base case assumption is a sustained period of mortgage rates of 6% or higher will lead to a fall in property prices of 15%. For this reason alone, there’s every chance the government will continue doing everything possible to settle down financial markets to bring down mortgage rates. If sacking the Chancellor and cancelling the mini-Budget doesn’t prove enough, then more is sure to follow.”

Lewis Shaw, founder of Mansfield-based Shaw Financial Services: “Unless there is significant intervention from both the Bank of England and the government, it’s a certainty that house prices will start to fall. With mortgage rates reaching new highs not seen for over a generation and signs they could move higher, the impact on buying power is stark. That can only translate into falling house prices. Even with the stamp duty cut, most first-time buyers were already exempt from that tax and are facing the highest rates. If first-time buyers can’t afford the mortgage payments, they won’t buy. Given that first-time buyers are the oil that keeps the machine turning, the property market begins to seize if they dry up. This all points to a change of direction from a seller’s to a buyer’s market. Add in the glut of buy-to-let properties about to hit the property portals as landlords decide the game is up, and you’ve got all the ingredients for a property crash.”


Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: “With the typical 2-year fixed rate mortgage now over 6%, it’s obvious this is going to have an effect on the property market. Many are now predicting house price declines of 10% next year, but this is a serious drop and unlikely given the lack of supply. We still have a massive shortage of houses in the UK and that will support prices.”

Mike Staton, director of Mansfield-based Staton Mortgages:This week, I drove past seven For Sale signs and only three of them were sold. This is worrying and could be seen as the first sign of a housing market crash. Hopefully we will not end up with one but it’s now starting to appear a very realistic possibility. This is especially the case when this week we saw one lender change applicants’ interest rates mid-way through their application, meaning that even the submission of an application isn’t protecting people from interest rate increases, even after they have paid reservation and product fees. With both of these factors in mind, it’s hard to see prices going anywhere but south, or staying flat at best.”

Gaurav Shukla, mortgage adviser at London-based broker, Home Me“Expect the Bank of England to continue to raise the base rate, potentially sharply, 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.”

Ian Hewett, founder of Ashford-based The Bearded Mortgage Broker: “Despite all the madness of recent weeks 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 have gone through the roof, 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.”

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. The housing market is looking extremely vulnerable.”

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.”

Michael O’Brien, managing director at Romford-based Home of Mortgages“The property 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.”

Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions: 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.”

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