The Office for Budget Responsibility (OBR) has predicted that UK house prices will fall by 9% over the next two years, the BBC reports. After 2024, the OBR expects prices to start rising again.
The dampening of prices is due to a combination of pressures, from the economic downturn, higher mortgage rates, and also a natural consequence of artificially inflated prices over the last two years. This time last year, it was possible to secure a mortgage deal at a rate of 2 or 3%, but now the figures are nearer 5 or 6%.
The cost-of-living crisis, with soaring inflation leading to higher prices in the supermarket, higher fuel and energy costs, and higher rents, is making it more challenging for first time buyers to save up for a deposit. However, this may be offset by a less competitive property market, with sellers more willing to negotiate on house prices.
Richard Fearon, chief executive of Leeds Building Society, told the BBC: “Our research shows that 81% of aspiring first-time buyers say that the cost-of-living crisis has made it harder for them to save for a deposit and almost half of them now doubt they will ever get onto the housing ladder.”
However, the BBC points out that there is a lot of local and regional variability in house prices, with less affluent areas in the north-east of England having consistently lower prices than most other regions.
The new Chancellor, Jeremy Hunt, recently delivered an Autumn Statement which was designed to steady the market nerves, after the turmoil created by his predecessor’s shock minibudget, which contained plans for swathing un-costed tax cuts. This spooked the financial markets, and caused mortgage rates to soar above 6.7%.
The Autumn Statement has already caused some mortgage deals to drop down to 5% and below, and there is further cause for hope in the Bank of England’s most recent forecast for interest rates next year, which they now expect to peak at 4.5%, as opposed to the previously predicted 5.5%.
Hunt also announced a reversal on the stamp duty cut by 2025, which was introduced by his predecessor. An industry insider told the Property Industry Eye recently: “The clock now ticking on potential stamp duty savings will bring a bit more urgency for people trying to get on the ladder or trade up in the next few years.”
They added: “As it’s still in place for a couple of years we don’t foresee a significant number of people bringing their plans forward to 2023, especially due to current affordability challenges, but we may see a jump in new sellers towards the end of next year and into 2024 to ensure they can move in time.”
Overall, first time buyers with enough deposit already saved may find that now is a good time to make a move, as house prices begin to fall, and mortgage rates also show signs of reducing.
If you are a first time buyer looking for a mortgage broker contact Tulip Mortgages today.
