Interactive Investor

Buyers need a miracle to turn home ownership dreams into reality

6th January 2023 07:33

Myron Jobson from interactive investor

Myron Jobson, senior personal finance analyst at interactive investor, comments on the latest Halifax House Price Index.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Even though the fall in the cost of the average UK home in December was lower than the monthly decline recorded in November (1.5% versus 2.4%), house prices are still cooling, with annual growth slowing to 2% (from 4.6% in the previous month). But the narrowing of the monthly decline suggests the housing market is still reeling from the effects of the ill-fated mini-budget. 

“But many first-time buyers will still need a miracle to turn their dreams of home ownership into reality as rising mortgage rates and the raging cost-of-living storm wreak havoc on buyers’ borrowing power. These headwinds also impact buyers seeking to trade up to a bigger home and could force them to stay put in properties that many first-time buyers seek to purchase.

“The general consensus among mortgage lenders is the slowdown in home sales that beset the UK housing market in the final quarter of 2022 will spill over into 2023. As the winter months are notoriously quiet for house sales, the state of the housing market will become clearer once the spring selling season gets under way as buyers and sellers recalculate their options.

“Higher borrowing costs mean home ownership remains out of reach for many. Many buyers will hope that waning demand for homes will result in a significant fall in property prices, but the harsh reality is, for many, any decrease in pricing won’t be enough to compensate for the increase in mortgage rates and bumper monthly expenses caused by inflation.

“However, there are still plenty of potential buyers still patiently waiting in the sidelines to get on to the property ladder. Assuming home prices ease, some of these buyers will begin to emerge.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.