Has a little stability finally crept into the housing market? Are there some “grown ups” in charge at Westminster? Is Father Christmas real?
These are some of the questions on my mind when I sit down to write this market update.
The housing market has had a rough ride since the mini budget at the end of September. Interest rates offered on mortgages skyrocketed as there were concerns the UK would go bust with Liz Truss’s extravagant spending and taxation plans. The Bank of England increased base rates to 3% in early November to combat high inflation. A new government lead by Rishi Sunak swept into power and rowed back on most of Truss’s initiatives to try and shore things up.
The economy as a whole is slowing, figures released recently show Gross Domestic Product (GDP) in the UK fell 0.2% in Quarter 3 (July – September). Inflation is staying at near record highs, which is putting pressure on disposable incomes and living standards.
So where does this leave the housing market?
The Halifax and Nationwide Building Societies housing data show a monthly decrease in average house prices of 0.4% and 0.9% respectively in October. The annual changes are still in positive territory but are trending down.
Rightmove published data this week stating that asking prices fell by over £4,000 between October and November as sellers accepted lower offers.
Is it all doom and gloom?
There are signs of light!
The average 2- and 5-year fixed rate mortgages are reducing, the rates peaked in October at 6.65% and 6.51% respectively. These have dropped recently and are now down to an average of 6.28% for a two year and 6.07% for a five-year fixed mortgage.
Many brokers are now predicting 5-year fixed mortgage rates will drop below 4% in early 2023 as the turmoil created in the September mini budget fade away and confidence in the UK debt markets improve.
Don’t forget that the above are the average rates available. There are rates close to 5% being offered to borrowers with over 25% deposits for 5-year fixed rate mortgages.
The good news is house prices are likely to stabilise in early 2023 if the cost of borrowing continues to reduce.
Finally, I can confirm Father Christmas is very much real and is still scheduled to arrive on 24th December, subject to inflationary pressures on reindeer grain and feed receding.
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