The UK house prices have been continuously slipping away for the past few months. It decreased further by 0.1% in September 2022. According to the top letting agents in Berkhamsted the last time the market observed a slight increment of 0.3% in its prices was in August, as confirmed by Halifax House Price Index.
The prices reached up to £293,992 in August when the growth rate was quite high, reporting 11.4%. But these figures fell back to £293,835 in September. The growth rate reached single digits since January for the first time, reporting 9.9%. June observed inflation in prices of up to £250.
But this is the month of economic uncertainty as intensified by Kim Kinnaird, director at Halifax Mortgages. He mentioned that the last quarter’s prices were even more than £10,000 as compared to the current situation. “This period signifies slower growth and the market seems to be letting down continuously. The housing market is at great risk and who knows what will happen in the very next moment”, Kim Kinnaird further commented.
What is the reason for the sudden deflation in house prices in the UK?
The time when stamp duty on house prices was decreased by the government was the major reason for the deflation in UK house prices. As soon as stamp duty decreases, the demand for homes by buyers increases. The owners rush to own the home after a sudden reduction in rates. The affordability leads owners to acquire the houses and interest rates keep rising accordingly. As a result of this, there has been a sharp slowdown in further increment of rates.
The government of the UK announced a tax-cutting statement on September 23 which further enforced lenders to decrease the rates of their mortgage commodities. The Bank of England further compressed the freedom of lenders after the release of the administration statement.
The uncertainty in the economy has been scrutinized since the pandemic hit the country. Since then there has been a continuous increase in the prices. Do you know that property values have increased up to 23% on average during the pandemic? The prices attained the peak, illustrating up to £55,000 increment in properties. At the same time, impersonal house prices raised to more than £100,000.
Andrew Wishart, property economist at Capital Economics shared his insights further on the deflation in rates. He highlighted that the Halifax index estimated average prices of properties to be up to 3.6%. But the prices that have been observed have reached up to 6% meanwhile in September.
What is the impact of decrement in property market rates in England?
The autumn last discovered £850 as the rate of monthly repayments. The prices get skyrocketed from £1,100 to £1,400, the figures signifying the average rates of the monthly repayments. The rates pushed up to 80 percent loan-to-value mortgages. But the future will observe a sharp increase in interest rates in England with up to a 5.5% increment as presented by the Bank of England. The current rate is stooping at 2.25%. The prices have been the highest since the year 2008
It doesn’t end here. Wishart estimated that house prices will even fall 12% more starting from now and reaching the year mid-2024. This will be the highest decrease observed after the financial crisis hit the UK.
“The market expected a rise in policy rates. But policy rates are going to increase by not more than 4%. This will seriously impact the need for properties. It will also reduce the number of loans a particular lender can offer to their buyers”, as highlighted by Martin Beck, chief economic adviser to the consultancy EY Item Club. While some financial analysts believe that no matter how much the prices of borrowing increase, the market will continue to be robust.