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What Have the Experts Noticed About House Prices?

Recent data unveils some surprising twists in the trajectory of UK housing prices, with some massive implications for both home buyers and sellers.

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A Sudden Dip in August

Asking prices for UK homes have experienced their most pronounced decline in August since 2018. This unexpected turn signals a cooling down of the property market after four straight months of diminishing house prices. Between the five weeks leading to August 12, new sellers listed their homes at an average of £364,895. This figure is a striking £7,012 less than the preceding month and constitutes the most significant dip since the outbreak of the pandemic.

What’s Behind The Drop?

A 1.9% decline in asking prices coincides with an era of record wage growth coupled with relaxed mortgage rates. Most of the UK has been grappling with inflated borrowing costs in the wake of multiple interest rate hikes by the Bank of England. A ripple effect can be observed with Halifax, the lender, reporting a 0.3% drop in average house prices in July compared to June.

However, while the downtrend in asking prices is undeniable, Rightmove emphasizes that the average housing prices are still a staggering 20% higher than what they were in the pre-pandemic era. Tim Bannister, director at Rightmove, points to the persistent hurdles first-time home buyers face. “There are still significant challenges in saving up enough for a deposit and affording higher mortgage payments,” he mentions.

The Impact on the Broader Economy

UK house builder, Crest Nicholson, casts a shadow with a bleak forecast. Due to escalating inflation and soaring interest rates, the company expects its full-year profits to fall considerably short of estimates. Despite the inherent resilience of the market thanks to a limited supply, economic uncertainty prevents people from taking the risk of moving.

Mortgage Matters

Mortgage costs are starting to lower, with the average five-year fixed mortgage rate dropping to 5.81%. Experts in the mortgage arena are skeptical about these rates plummeting below 5% this year. Nicholas Mendes, a mortgage manager, says that the decline in costs has only softened the blow for those who already own property. Prospective homeowners are still struggling to afford their first homes.

A Look Ahead

With house prices in decline thanks to increased mortgage rates, the housing market seems poised for a rollercoaster ride. Records indicate that prices peaked in August of the previous year, leading to a subsequent upheaval in bond markets and escalating borrowing costs.

In light of these revelations, economic experts believe that a further downturn in housing prices is inevitable. However, Nationwide’s chief economist, Robert Gardner, remains optimistic. He believes that the housing market can still land on its feet given the predicted low unemployment rates and the significant proportion of borrowers on fixed rates.

The core issue

The ongoing slowdown in the housing market can be attributed to the rising cost of living and escalating mortgage borrowing costs resulting from inflated interest rates. Although some financial pundits believe that the Bank of England’s tightening cycle might soon conclude, housing affordability remains a significant concern.

While the housing market dynamics continue to shift and uncertainty rises, potential home buyers and sellers need to stay informed and tread with caution. The upcoming months will undoubtedly bring more clarity to the evolving landscape of the housing market.

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