Interactive Investor

Housing market slowdown spills over into the new year

1st February 2023 07:31

Myron Jobson from interactive investor

interactive investor comments on the latest Nationwide House Price Index.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The housing market slowdown towards the end of 2022 has spilled over into the new year, with house price growth decelerating further to 1.1% in January from 2.8% in December after seasonal effects are removed from the equation.

“There is no denying that high mortgage rates and the stubborn persistence of high inflation have taken the wind out of the housing market's sails. Spring, typically a busy season for the UK's property market, will provide the real acid test for the robustness of house prices.

“The affordability squeeze continues to be a headache for many would-be buyers. House price growth has significantly outpaced growth in earnings, while rampant inflation has robbed buyers of purchasing power – pricing many out of the property market. So too has the whiplash-inducing speed with which mortgage rates have increased in recent history.

“Mortgage rates have come down a bit since the chaotic weeks in the mortgage marketplace that ensued ill-fated mini budget back in September. Mortgage rates could yo-yo up and down depending on a number of factors beyond interest rates – which appear set to rise tomorrow - including the latest economic backdrop and competition in the mortgage marketplace.

“It’s worth remembering that even though house price inflation has come down, it doesn’t mean that prices are falling. It just means that home prices aren’t rising as fast. Buying now with high mortgage rates and high prices creates a high monthly cost for borrowers to carry at a time many can least afford it amid the biggest fall in living standards in generations. As such, getting on the property ladder remains a tall order for many first-time buyers. The Bank of Mum and Dad is also facing its own cost-of-living challenges and, for many, can’t be relied on to provide much needed financial support. Fast-rising rents are not offering any relief and could keep some wannabe homeowners in the hunt for a home for longer than they would like.”

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