Following the Nationwide May House Price Index published this morning, brokers and advisers have reacted.
Rohit Kohli, director at Romsey-based mortgage broker, The Mortgage Stop: “May was a solid month overall but, after the latest inflation data, ended on a mad note. The rest of 2023 now looks uncertain. The long wait until the next Bank of England interest rate meeting on 22 June could fuel speculation and promote caution among prospective buyers. Increased borrowing costs amid the current upheaval in the mortgage market could discourage potential buyers, slowing the market further. If the base rate rises to 5% or even 5.5%, the impact on sentiment and demand could be significant. Higher costs could reduce affordability, potentially suppressing activity and lowering house prices. This could also increase arrears and repossessions as homeowners shift onto higher payments.”
Kundan Bhaduri, director of London-based property developer and portfolio landlord, The Kushman Group: “May was moving along nicely until last week’s inflation data rattled the mortgage market, prompting lenders to withdraw and increase rates across the board. This will have a profound impact on demand, affordability and the overall dynamics of the property market for the rest of 2023. Uncertainty surrounding inflation, interest rates and the economy will temper buyer sentiment. This latest disruption in the mortgage market, with higher borrowing costs and reduced access to financing, will deter potential buyers and place even more emphasis on affordability, which means borrowers are likely to have to put in larger deposits. This makes the market tougher for first-time buyers and less attractive for investors. The one thing we can all be certain of is that while house price growth will slow down in 2023, house prices will continue their steady climb upwards soon enough given the intrinsic demand in our economy, the entrenched lack of supply and the relative strength of the jobs market. Overall, despite this latest mortgage market turmoil, we remain bullish.”
Ross McMillan, owner at Glasgow-based Blue Fish Mortgage Solutions: “May started encouragingly and then swerved violently in the past week or so from relative stability to wild instability within the blink of an eye. How this recent shock to borrowers’ systems impacts the overall housing market in the near future is difficult to gauge but anecdotally, appetite from first-time buyers in particular remains stubbornly strong so far. In Scotland, seemingly across most areas, there has been no real sign of any significant fall in prices and, whilst the number of buyers may be less overall, a percentage above the home report value remains the expected norm. Ongoing turmoil and uncertainty around rates and availability of products is, however, a hammer blow to any thoughts of recovery in the buy-to-let sector, which now seems set for a long period on the naughty step whilst lenders and investors consider their next moves.”
Craig Fish, Managing Director at London-based mortgage broker Lodestone: “Just when you thought the market was stabilising, the inflation data emerged and triggered turmoil in the mortgage market. We were witnessing more normal levels of property activity in May, but there are now concerns about how much higher rates could go. Activity could stagnate moving forward as people take stock. We have already had some clients tell us that their property plans are on hold until things settle down. The hope is that as inflation drops, conditions will improve and we could see a strong end to 2023, which should continue into 2024.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages: “The headwinds the Nationwide refers to have definitely picked up over the course of the past week. The current mortgage market volatility we have that was sparked by the inflation data could restrain property transactions moving forward, with rising rates potentially deterring buyers. If the Base Rate heads above 5%, all bets are off, potentially inducing a property market slowdown. Projecting property market trends is difficult, but unless there is some substantial positive news, higher interest and mortgage rates could prompt a reduction in transactions during the rest of 2023 and see prices cool further.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com: “May opened strongly, but the market has cooled noticeably since last week’s inflation figures were released. Despite the mixed signals from Nationwide and Halifax, property prices are falling, as evidenced by the Land Registry figures reporting five consecutive months of decreasing prices. Equally, transactions in April this year were down a quarter on April 22. So demand is falling as supply is increasing due to the spring rush. Property prices are likely to start falling more sharply between now and the end of the year, especially once it becomes clear prices are indeed, dropping. That will cause buyers to hold off in the expectation of further falls.”
Oliver Fish, director of London-based luxury estate agency, Oliver James: “May saw a lot of activity in Central London with international buyers, in particular high net worths from the Middle East, coming to the capital in big numbers to take advantage of the recent softening of the market and invest here securely for the long term. We’ve seen landlords selling up their rental properties as the buy-to-let market becomes less attractive to investors with the cost of borrowing and increased legislation. Buyers that require borrowing are having to look in a lower price range due to the increase in mortgage costs. I expect mortgage rates may well go up further in the region of 0.25%, house prices to stabilise over the coming months and confidence to slowly creep back as we adapt to an even more expensive rate environment. My guess is that over the next couple of years the base rate will come down, better mortgage deals will appear and property will start heading the way it always does, namely up.”
