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Britain’s biggest homebuilder hoping better mortgage deals could stimulate UK housing market

The average selling price of a Barratt home was up 13.6 per cent to £372,000 in the second half of 2022.

Britain’s biggest housebuilder said better mortgage deals could lead a recovery in the market this year.

Barratt Developments said things could start easing, after reservations dropped 57 per cent in the final months of 2022 – following the disastrous Liz Truss/Kwasi Kwarteng mini-Budget which caused a meltdown in the markets and higher interest rates.

The Leicestershire-based housebuilder has adopted a cautious approach to the year ahead despite a 16 per cent rise in pre-tax profits in the second half of 2022 to £501.6 million (compared to the second half of 2021).

Total sales for the half year were up almost a quarter at almost £2.8 billion – thanks to a “significant step-up” in the average selling price – with the average selling price of a Barratt home up 13.6 per cent to £372,000. The number of new home sales completed was up 7 per cent at 8,626.

The group – which is based in Coalville and includes Barratt Homes, David Wilson Homes and Barratt London as well as the Wilson Bowden commercial property arm – said it had seen a “modest uplift” in reservations this month, though they were still down 46 per cent lower on this time last year.

In recent months mortgage costs have gradually fallen back following actions to stabilise markets – including a new Prime Minister and Chancellor – and signs that wider interest rates may soon be peaking. Five-year fixed-rate mortgages are now available at below 4 per cent.

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Chief executive David Thomas said the “tremendous efforts” of its employees, sub-contractors and supply chain partners had helped it deliver a strong performance in the second half of 2022.

He said: “However, the economic backdrop has clearly been challenging and consumer confidence weakened significantly during the half, which meant we saw lower reservation rates for future sales – particularly in the second quarter.

“Whilst we have seen some early signs of improvement in current trading during January, we will need to see continued momentum over the coming months before we can be confident that these challenging trading conditions are easing.

“Our business remains fundamentally strong, both operationally and financially, with an experienced leadership team, a strong net cash position and a resilient and flexible business model.

“We are well-placed to navigate the challenges ahead and are focused on driving revenue whilst taking a decisive and disciplined approach to costs. As always, our priority is delivering excellent quality and service for our customers.”

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Barratt said if the recovery in demand continues, it expects to deliver total home completions of between 16,500 to 17,000 in 2022-23, down from 17,908 in the previous year.

But house prices are still under pressure with figures on Tuesday showing annual growth slowed to its lowest level in three years last month.

Halifax said the average house price is now more than £12,000 below a peak seen in August last year.

By Tom Pegden

Source: Business Live

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How interest rate rise will affect property market and mortgages

The Bank of England’s decision to hike interest rates to a 15-year high is set to see mortgage payments rise for millions of homeowners.

On Thursday, the Bank confirmed UK rates will rise for the tenth time in a row, to 4 per cent from 3.5, in a bid to control inflation after it reached a record 11.1 per cent in October.

The Bank has faced a tough call over what approach to take, as higher mortgage costs saw the housing market suffer five successive months of falls in property prices.

The IMF reported this week the UK would be the only G7 member to see their economy go backwards this year, with a likely 0.6 per cent contraction. While this would usually lead to calls for interest rates to be cut, the current inflation rate of just over 10 per cent is pushing the Bank to act on its mandate to bring it back towards its 2 per cent target.

Below we look at how the latest interest rate increase could impact the housing market for buyers and borrowers alike.

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After big increases in 2022, the price of the average property in January was £258,297 – down 0.6 per cent on December, and well below the £281,000 figure from last year.

House prices stalled in September, followed by monthly falls of 1.0 per cent in October, 1.2 per cent in November and 0.3 per cent in December.

Further falls are likely now the Bank of England has approved an interest rate rise for the tenth time in a row, as it will likely push mortgage rates up further.

Higher mortgage rates tend to push house prices down as people are less willing to borrow money.

On Thursday, high street lender Santander warned house prices are set to tumble back to 2021 levels, and has set aside more cash for loan losses as it braces itself for a possible rise in the number of borrowers falling behind with repayments.

The Spanish-owned group is forecasting a 10 per cent fall in house prices this year as interest rate hikes dampen demand.


Mortgage rates offered by lenders jumped following the mini-Budget last year and borrowing costs have also been increasing as the Bank of England base rate has risen.

This has resulted in a plunge in the number of mortgages being approved. The Bank reported on Tuesday that 35,000 were given the green light in December compared to 46,000 in November, the UK’s lowest since 2009.

UK Finance estimates that some 715,000 borrowers on tracker mortgages will feel the pinch as interest rates rise again. It estimates householders will be paying around £588 more a year on average as a result of the Bank’s announcement.

In addition, the Office for National Statistics has predicted more than 1.4 million households are facing the prospect of interest rate rises when they renew their fixed-rate mortgages this year.

A string of base rate hikes have taken place over the past year, but borrowers on fixed-rate mortgages were cushioned from their immediate impact. Analysts have said some may get a shock when they come to renew.

Labour has said homeowners could face mortgage hikes of up to £14,000 a year as they come off low fixed-rate deals, adding to the squeeze on living standards.

Analysis by the party shows predicted annual increases in costs for a median house purchase at 80 per cent mortgage in every constituency in the UK.

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Downing Street acknowledged the interest rate hike could be “difficult” for mortgage holders.

The Prime Minister’s official spokesman said: “Inflation is the biggest threat to living standards in a generation, so we support the Bank’s action today to help us succeed in halving inflation this year.

“We will continue to take the difficult decisions needed to do everything we can to reduce inflation, including not funding additional spending or tax cuts through borrowing, which only serve to fuel inflation further and prolong the pain for everyone.”

The spokesman added: “This is a difficult time for mortgage holders in the UK. As the Chancellor has said, sound money and a stable economy are the best way to deliver lower mortgage rates and keep down the costs of mortgage payments.

“That’s why we are taking the necessary and responsible action to halve inflation, reduce our debt and get the economy growing.”


Robert Gardner, Nationwide’s chief economist, said: “There are some encouraging signs that mortgage rates are normalising, but it is too early to tell whether activity in the housing market has started to recover.

“The fall in house purchase approvals in December reported by the Bank of England largely reflects the sharp decline in mortgage applications following the mini-Budget.

“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks.”

Jeremy Leaf, a north London estate agent, added: “The fizz has certainly left the market, leaving behind more serious needs-driven as opposed to discretionary buyers, coming to terms with more stable mortgage rates and greater balance between supply and demand.

“Looking forward, the outlook for house prices remains fairly steady with no expectation of any dramatic change.”

By William Mata

Source: Independent

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There is still promise in the UK housing market – Lawrence Stephens

The UK housing market had a rollercoaster ride last year: house prices hit record levels and the Bank of England’s base lending rate increased nine times in the 12 months to December 2022, rising from 0.25 per cent to 3.5 per cent.

It created a lull in market activity and put the brakes on property prices.

So, what next? Optimists argue that a crash will not happen with current mortgage rates predicted to fall by up to 25 per cent this year. They also point to big lenders such as HSBC, Barclays, Lloyds and Natwest agreeing forbearance measures to help struggling borrowers: switching them to interest-only or competitive fixed rate deals.

Schroders research shows that average UK house prices are more than eight times average earnings; in London, that ratio rises to 11 times. Such stories make good headlines, but the economic mood is gradually changing – from general gloom to a more nuanced outlook.

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Market positives

Notably, the shift in economic sentiment is reflected by reduced rates for new two and five-year fixed mortgages: after spiking to 6.5 per cent last October, they have since fallen back towards the five per cent mark and below.

For potential buyers, interest rates are critical because they directly affect both affordability and lenders’ willingness to lend. After a decade of low interest rates, recent sharp swings have been unsettling.

Assorted lenders – Santander, Barclays, Nationwide and Halifax – now forecast imminent rate reductions to average around 4.5 per cent. Unusually, this comes as the base rate is anticipated to reach four per cent this week.

Mortgage rate cuts by big commercial lenders make the market more attractive and more affordable for domestic and first-time buyers – not just to overseas or cash buyers as happened when rates hit their recent highs. Despite media hype about reducing their mortgage lending, banks still have the appetite to lend.

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A sense of calm

After last year’s shocks, calm has returned. Much has been digested by the market, including the ‘new normal’ in interest rates.

Potential increases are now factored into people’s thinking, so industry professionals can advise with greater confidence on where rates may head next.

Whenever the UK housing market is reportedly ‘down’, history shows it is never ‘out’. Buyers with available funding should press ahead on properties they really want. Good housing stock is not always available: in busier markets, people often lose out because of increased competition. Only those who are not yet able to buy should be waiting.

One caveat arises: UK incomes need to increase in real terms to boost domestic buyers’ purchasing power.

Without that, the market may still remain more attractive to overseas and cash buyers.

By Goli-Michelle Banan

Source: Mortgage Solutions

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Singletons punished by rising mortgage rates as couples now dominate housing market

Singletons are being punished by rising rates leading to 63 per cent of first-time mortgages now being taken out in joint names.

Higher mortgage rates and squeezed budgets mean just 37 per cent of first-time buyers taking out a mortgage are purchasing solo, according to data from the country’s biggest lender, Halifax.

This is a huge change compared to 2014, the earliest year when the data was available, when just 43 per cent of first-time borrowers took out a mortgage jointly while 57 per cent bought on their own.

The increase in costs experienced in the past year has meant that banks are willing to lend less as people’s rising energy and food bills reduce how much they can afford to pay for their home loans each month. Similarly, the higher mortgage rates have also meant people can’t always borrow the same amounts they did when rates were low and pass banks’ affordability tests, particularly if this is based on one salary.

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Although property prices are expected to go down this year, by as much as 10 per cent, they have risen significantly in previous years.

The overall number of first-time buyers is still higher than pre-pandemic levels but down 11 per cent on 2021’s record high of 405,320, sitting at 362,461 in 2022.

Prices were unusually high in 2021 thanks to the “race for space” – pent up demand from the pandemic and Government measures to ease stamp duty costs, leading to a record number of first-time buyers getting the keys to their first home.

This is now easing somewhat, but affordability is still a problem with average property values for first-time buyers now around 7.6 times the average UK salary.

Separate data from the Office of National Statistics last year showed house prices grew faster than earnings in 91 per cent of local authority districts, leading to a reduction in housing affordability in these areas.

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Kim Kinnaird, mortgages director at Halifax, said: “Today, getting your own place for the first time will likely mean paying over £300,000 for that new home, and putting down, on average, a £62,000 deposit.

“The length of time needed and cost of raising a deposit are likely having an impact on the profile of the average first-time buyer over time. Today, those starting out on the housing ladder are 32 years old on average – two years older than a decade ago – and almost two thirds of people are now getting their first mortgage in joint names.”

The average two-year fixed-rate mortgage interest rate is 5.49 per cent, compared with 2.38 per cent last January, according to Moneyfacts, while a five-year deal is at 5.26 per cent, compared with 2.66 per cent 12 months earlier.

By Grace Gausden

Source: i News

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Property Outlook for 2023

For anyone thinking of buying or selling property in 2023, it is a good idea to take stock of what the property experts are predicting for the year ahead. Many people are asking the question – will house prices fall in 2023 and is it a bad time to sell? The other major concern is what type of mortgage to take out for homeowners whose fixed rates end in 2023.

This article provides a summary of forecasts from some of the top property experts, which should help you to understand how the property market could impact you in 2023.

What is the current property outlook?

Heading into 2023, there are early suggestions that the property market could be in for the biggest house price fall since 2008. The combination of high mortgage interest rates and the cost of living crisis are adding up to a possible property value crash. Of course, experts have shared forecasts of property market declines before, which were never realised, but there is a growing number of signs that the UK is bracing for significant house price falls.

Throughout the pandemic, many homeowners saw their property value grow substantially due to the housing boom, with the stamp duty holiday helping to boost the property market following the slowdown during lockdowns. Now many experts are forecasting that the bubble is about to burst.

At the end of 2022 the property market had already shown indications of a declining trend. In November, the average house price dropped by 2.3%, which was the biggest drop since 2008. December marked the fourth consecutive month of declining property prices, which was also the longest run since 2008.

Savills Estate Agents are predicting that house prices will fall by 10% during 2023. Halifax are predicting a similar figure of 8%, while Nationwide are expecting a less extreme fall, predicting a 5% drop before the market stabilises to just below pre-pandemic levels.

Mortgage interest rates

Following the mini-budget in September, many lenders removed mortgage products from the market, leaving many potential property buyers unable to get onto the property ladder. Mortgage rates soared to over 6%, while the average five-year fixed rate stands at 5.6% at the start of 2023, which is considerably higher than interest rates were at the same time last year.

With mortgage rates at a much higher rate than they have been in recent years, people are being priced out of getting onto the property ladder or buying a bigger home, preferring to wait to see if mortgage rates start to come down again. Prospective buyers are being cautious, as they are worried about a potential house price crash that could leave them in negative equity. This is reflected in the 28% year-on-year reduction in property sales reported by Zoopla in December 2022.

This slowdown in property sales and reduction in demand impacts the house prices, with sellers being forced to reduce asking prices to enable them to secure the sale. Zoopla recently shared that sellers had reduced the asking price by an average of 4% in December 2022 to achieve a sale.

There will be some exceptions of sellers who will not be forced into reducing asking prices, for example, where there is a higher demand for a certain property type or properties in a much-sought-after location, which we discuss further on in this article.

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Cost of living crisis

The UK has been experiencing an ongoing cost of living crisis, with inflation increasing at a higher level than wages. UK households are dealing with exceptionally high energy bills, as well as price increases on fuel, groceries and many other living costs. The inflation rate is expected to ease later on in 2023, which should, in theory, improve the finances for many UK households and provide more disposable income that could be used for buying property.

Remortgaging options – fixed rate or variable?

According to the Office for National Statistics, more than 1.4 million households in the UK will face increased rates as their mortgage renewal is due in 2023. It is a worrying time for homeowners who have been on a lower fixed rate for several years, who now face the decision of whether to enter another fixed rate term or to opt for the unpredictability of a variable rate mortgage.

Around 57% of the fixed rate mortgages that are coming to an end in 2023 were on fixed rates of below 2%, so moving onto rates of between 4% – 6% will be a huge financial burden for so many. Any homeowners who may have been considering moving into a bigger property are likely to be put off by the current interest rates, further reducing the demand for properties and impacting house prices.

As homeowners approach the end of their fixed mortgage, they have to make the choice of being tied down to a higher rate mortgage for 2 or more years or take more of a gamble by choosing a variable rate mortgage in the hope that rates will start to fall in the near future. Mortgage advisers are being inundated with queries about which option will be more financially beneficial, but it is too difficult to forecast when the mortgage rates will start to fall.

Shortage of housing stock

The continued shortage of housing stock shows no signs of being resolved, with the government currently failing to meet targets to build 300,000 new homes each year. The shortage of new houses being built, coupled with high mortgage rates and increased living costs is likely to keep the rental property market buoyant. With more would-be homeowners choosing to wait to buy a property, this is expected to further increase the demand for rental properties.

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Regional variations in house prices

While many experts are predicting a slide in house prices, rather than a crash, there are some areas of the UK and property types that should buck the trend. Over the last few years, there has been a surge in demand for properties that are in more rural locations, allowing people to spend more time outdoors and buyers are also looking to purchase more spacious properties. Semi-detached properties and terraced houses are the most in demand, with flats at the lower end of demand.

With many home buyers having more flexibility around their working location, some buyers in 2023 will be reviewing the options of buying properties in areas where they can get more for their money. Over the last few years, the North of England has become popular with buyers who are not tied to one location for work and with an increased population of people working from home compared to pre-pandemic, this trend looks set to continue.

Cheaper property prices in the North of England have been attracting property investors who can build up their property portfolio faster by purchasing cheaper options than areas such as London and the South-west of England. However, mortgage rate increases will have a big impact on property investors who do not have capital for property purchases and need to take out mortgages.

Property investment

The high mortgage interest rates at the start of 2023 are bad news for investors who were planning on taking out buy-to-let mortgages to boost their property portfolios, and investors are likely to be more cautious in 2023 until rates start to fall. However, if there is a house price crash, this will present excellent opportunities for both residential buyers and property investors who can take advantage of lower property prices.

Property investors can gain a return on investment from both their rental yields and any house value increases that occur while they own a property, so even if house prices fall over the next year or so, there is still a good chance that there will be generous capital growth over several years. With a high demand for rental properties, there should also be less voids and the ability to charge high rental yields.


While there is a large number of property experts predicting a significant fall in house prices in 2023, this can help many people to get onto the property ladder once mortgage rates start to fall, which is expected to happen over the course of the year. However, at the start of the year while mortgage rates are still high, prospective first-time buyers and homeowners looking to upsize are being cautious and waiting to see if mortgage rates fall.

Homeowners who saw a large increase in house value since the pandemic could stand to lose those gains, unless they are able to secure a sale before house prices start to fall.

Property investors who do not have to borrow money from mortgage lenders to buy property will be eagerly awaiting the predicted house price falls, but overall, estate agents can expect to have a quieter start to the year for house sales until momentum picks up again when mortgage rates start to fall.

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Average UK house price falls for fourth month in a row, says Halifax

The average UK house price fell for the fourth month in a row in December, according to Halifax.

Property values decreased by 1.5% in December, after a 2.4% drop in November, a 0.4% decrease in October and a 0.1% dip in September.

The annual rate of house price growth more than halved, to 2% in December, from 4.6% in November.

This marked the lowest annual growth rate recorded since October 2019, when a 1.1% increase was recorded.

Across the UK the average house price in December was £281,272.

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Kim Kinnaird of Halifax Mortgages said: “As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.

“The housing market was a mixed picture in 2022. We saw rapid house price growth during the first six months, followed by a plateau in the summer before prices began to fall from September, as the impact of cost of living pressures, coupled with a rising rates environment, began to take effect on household finances and demand.

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“These trends need to be viewed in the context of historic prices. The cost of the average home remains high – greater than it was at the start of 2022 and over 11% more than house prices at the beginning of 2021.

“The first half of last year was a very strong period for sellers; between January 2022 and August 2022, the average cost of a home rose by over £17,000 to £293,992, setting a new record high.

“As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8% over the course of the year.

Source: The Guardian

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Analysts positive despite largest fall in house prices in 14 years

Average house prices have seen their sharpest drop since 2008 according to the latest Halifax House Price Index.

The index shows that the average house price fell by 2.3% in November to £285,579, which was the third consecutive fall and the largest since October 2008.

The report also showed that the annual rate of growth fell in November from 8.2% to 4.7% with growth slowing in every UK region bar the North-East.

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And with the Bank of England hiking interest rates from 2.25% to 3% triggering a low number of mortgage approvals, Rightmove has reported a drop of 21% in the number of first-time buyers in the last two weeks of October 21 compared with the same period in 2021.

Although some analysts have been predicting a crash in the UK housing market of as much as 20%, others are more optimistic.

Halifax Mortgages director Kim Kinnaird said: “When thinking about the future for house prices, it is important to remember the context of the last few years, when we witnessed some of the biggest house price increases the market has ever seen. Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels (+£46,403 vs March 2020).

“The market may now be going through a process of normalisation. While some important factors like the limited supply of properties for sale will remain, the trajectory of mortgage rates, the robustness of household finances in the face of the rising cost of living, and how the economy – and more specifically the labour market – performs will be key in determining house prices changes in 2023.”

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Meanwhile, experts at Cornerstone Tax are forecasting a rise between 5% and 8% as foreign investment, driven by the decline in the value of sterling, making the housing market 10% cheaper.

Cornerstone Tax chairman David Hannah was adamant: “There will be NO crash and NO 10-20% fall in property prices that we saw in the Noughties. The UK property market has tended to be more stable than any other global market in property.”

He added: “We have faced a massive set of instabilities. We’ve had two years of the pandemic, necessary pandemic spending, we’ve had the war in Ukraine and that has increased inflation which has led to a massive increase in interest rates. Recent government policy in the UK has led to a devaluation in sterling and at least one if not two regime changes in the conservative party, and all of these factors have added to a sense of uncertainty of what’s going to happen in 2023.

“In early 2023, we will see slow demand. Only those people that are forced to sell will see a small fall in prices, however, over the whole of 2023, I expect to see low to mid to single-digit growth over the UK property market – between 5% and 8%. Despite the negative headlines we have been seeing, there is an underlying pressure on the market and that is leading to upward pressure on prices.”

Hannah concluded: “We now have a growing number of people that want to move to the UK. The first is the overseas investor who regards UK property as a safe haven for their money because the country they principally live in is not economically or politically safe. The second are those who want to become second homeowners. The third and final group is those who want to leave their country of birth and are in need of a home. All of these factors over the course of the next 12 months, I believe, are what will support the UK market and leave it with a modest and steady rate of growth.

By Chris Frankland

Source: KBB Review

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Positive outlook for housing market as buyer sentiment improves

Despite the increased uncertainty of recent months, the latest survey from Savills shows that buyer commitment has improved since the firm’s previous survey in August, when it hit its lowest point since the start of the pandemic (April 2020).

This latest survey, undertaken this month, points clearly to the buyer groups most likely to be active in 2023: needs-based buyers in the early part of the year and increasingly the equity-rich lifestyle ‘right-size’ buyers as the year progresses.

Of those who gave a reason for moving, 41% were downsizing, 36% upsizing, while 23% were in the market because of a relationship breakdown or a bereavement, to reduce borrowing or because a change in employment necessitated a move.

Asked about their commitment to move, a net balance of +3% of all respondents said they were more committed to moving within the next three months and +12% over the next six months.

This rises to +20% for those moving for work, +32% for those moving because of a bereavement and +39% for those looking to reduce levels of borrowing. The most committed group, with a net balance of +48%, are moving because of a relationship breakdown.

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These needs-based buyers express the greatest urgency to move within the first half of 2023. By contrast, levels of commitment to moving amongst those looking to ‘right-size’ their homes, whether upsizers or downsizers, rise significantly over the next year or two.

Frances McDonald, Savills residential research analyst, said: “A return to a more stable political and financial environment following the tumultuous ‘mini-budget’ has led to a more positive outlook among potential buyers and sellers, despite the expectation of further economic uncertainty.

“While there are very clear headwinds, this survey suggests that there is a strong seam of demand in the market, but that it will be clearly split between those who need to move quickly and more discretionary buyers equally committed to moving but happy to bide their time over the next 12-24 months, to ensure that they get the right home at the right price.”

Some 77% of Savills agents agree that there has been a marked increase in the number of buyers coming through their doors looking to take advantage of expected lower house prices next year. Savills has forecast average falls of -6.5% across the UK prime regional markets next year, but a net +10% increase over the next five years, pointing to an opportunity for those less reliant on borrowing.

More debt-dependent first time buyers and mortgaged buy-to-let buyers are more likely to find themselves less able to transact until affordability improves, particularly until there is more certainty in the lending market, Savills says.

“The legacy of the pandemic – where buyers were driven by lifestyle choices and the birth of the ‘race for space’ phenomenon – is now permanently ingrained in the UK buyer’s psyche and expected to continue to shape choices in 2023,” continued McDonald.

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A vast majority (93%) of Savills agents agree that the value of home life is now more important than ever for their buyers. This is translating into buyers taking a longer-term view when searching for the perfect home. Fewer than one in 10 (9.7%) of buyers anticipate owning their next home for less than five years, while 60% expect to own for at least 10 years. A quarter (25%) of aspiring buyers are currently looking for their ‘forever’ home, with a 20+ year timeframe in mind.

Despite a return to offices and normal social routine, country living also remains popular. When asked what type of location is most attractive, the majority of aspiring buyers opted for small towns, villages and the countryside, over cities and their suburbs.

Agents also agree (58%) that somewhere to work from home is still a key priority for buyers.

“Buyers are also continuing to prioritise proximity to parks and open spaces, and family, above transport, amenities and schools,” added McDonald. “Only in London has proximity to the nearest train or tube station overtaken parks and open spaces, with proximity to family in fourth place behind shops and amenities.”

By Marc Da Silva

Source: Property Industry Eye

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Average asking price of UK homes down by 2.1% in a month, says Rightmove

The average asking price of homes being put on the UK market has fallen by 2.1% over the last month, according to Rightmove, which said it had seen the largest pre-Christmas dip of the last four years.

The UK’s biggest property website said the average asking price was £359,137 in early December – about £7,862 less than a month previously. The fall in asking prices followed a 1.1% decrease in November’s prices, and will be seen as further evidence that the property market is rapidly cooling.

Kwasi Kwarteng’s infamous mini-budget, which sent mortgage rates rocketing, looks to be the point at which property prices peaked – for now at least.

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Last week Halifax said prices in the UK fell by 2.3% in November, the largest monthly drop on its index since the start of the 2008 financial crisis.

Terraced properties on the high street, Henley-in-Arden, Warwickshire, England
UK house prices fall at fastest rate in 14 years, says Halifax
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At the start of the month, Nationwide said UK house prices were falling at the fastest pace in almost two and a half years, as the turmoil of September’s mini-budget affected the sector.

Despite this, Rightmove said that at the end of 2022, average asking prices were 5.6% higher than at this time a year ago, only slightly below the 6.3% growth recorded in 2021.

However, it predicted a 2% fall in prices next year as a multispeed, hyperlocal market emerges, with “some locations, property types and sectors faring much better than others”.

The number of views of homes for sale on Rightmove was up 11% compared with this time last year, a sign that there are many potential movers who are weighing up their options, it said.

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“After two and a half years of frenetic activity it’s easy to forget that having multiple bidders immediately lining up to buy your home was the exception rather than the norm in pre-pandemic years, and there will be a period of readjustment for home-movers as properties take longer to find the right buyer,” said Rightmove’s Tim Bannister.

“We’re heading towards a more even balance between supply and demand next year, but we don’t expect a surge in forced sales, which would cause a glut of properties for sale and contribute to more significant price falls in 2023,” he added.

By Miles Brignall

Source: The Guardian

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House prices: What happens when they fall?

Annual house price growth has slowed, and the latest monthly figures show a fall, according to Nationwide.

It follows the Bank of England’s decision to increase interest rates to 3%, meaning higher mortgage costs for many. Further rate rises are expected.

What is happening to house prices?
In the last two years, prices rose steeply – by about a quarter – across most of the UK.

That pace of growth was much faster than that seen after the 2008 global financial crisis, where houses lost about a sixth of their value and it took five years, on average, for prices to recover.

However, they have now started to slow.

Nationwide’s figures show prices fell by 1.4% between October and November – the sharpest monthly drop since the middle of 2020.

On an annual basis, it found prices grew by 4.4% compared to 7.2% in October.

The building society said the housing market looked set to “remain subdued” in the coming months.

Will house prices fall in the UK?
Monthly changes can be blips, but the UK’s largest lender, Lloyds, is planning for an 8% price fall next year.

In November, the Office of Budget Responsibility (OBR), which advises the government on the health of the economy – predicted that house prices will drop by 9% over the next two years.

Big jumps in interest rates put pressure on the amount people can afford to offer for houses, and that means less demand.

Mortgage affordability also depends on wider cost-of-living pressures like energy bills, wages and job security. The future of house prices depends on the economy as a whole.

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What happens when house prices fall?
Falling house prices have the biggest immediate effect on people who want to move.

Some sellers may decide to delay putting their homes on the market. Homeowners who are considering moving may find they have less money to spend.

There were fewer property sales this year than in the 12 months leading up to last summer’s surge in prices before the temporary stamp duty reduction ended.

But if interest rates stay high, an increasing number of people will come off fixed-price mortgages (about 100,000 each month) to new, higher rates.

Some homeowners will find higher these monthly payments unaffordable, making them more likely to sell.

First-time buyers may find properties are more affordable, allowing them to get a foot on the ladder – assuming they can get a mortgage.

But a drop in prices can also send shudders through the finances of those homeowners who are staying put.

At the most extreme, homeowners can end up in negative equity – where the amount they have borrowed is greater than the current value of their property.

With about a third of household wealth tied up in home values, falling prices can make people feel less financially secure, mean they save more than they spend.

Less spending can make an economic slowdown even worse.

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Are people struggling to pay their mortgage?
The number of people in arrears peaked during the 2008 financial crisis, but did not rise significantly during the pandemic, helped by lenders granting payment holidays.

In the worst case, payment difficulties can lead to banks and building societies repossessing houses, although lenders try to avoid this.

More than 200,000 properties were repossessed in the five years after the financial crash.

As a result of the Covid pandemic, repossessions were suspended between March 2020 and April 2021. In the year after they restarted, there were fewer than 4,000.

Does a drop mean a house price crash is inevitable?
When the Bank of England raised interest rates by 0.75 percentage points to 3% on 3 November, it was the biggest single rise in the cost of borrowing since 1989.

After the mini-budget, financial markets were forecasting that the Bank of England’s interest rate would rise above 6% in 2023.

However, traders now expect the peak to be under 5%. You can use the mortgage calculator above to see how big an effect those kinds of changes can have on monthly repayments.

In the early 2000s property boom, 100% mortgages and cashback offers were not uncommon.

But after the 2008 financial crash, mortgage lending rules were tightened.

As a result, loans should leave more room for prices to fall before borrowers are stuck with negative equity.

Most recent borrowers have also had their ability to pay checked against interest rates even higher than the ones we’re seeing at the moment.

By Robert Cuffe & Christine Jeavans

Source: BBC News