Property market slowdown evident
1st November 2022 09:55
by Myron Jobson from interactive investor
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Many buyers can’t make the numbers work as the Bank of England interest rate decision looms, says Myron Jobson as he comments on the latest Nationwide House Price Index.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Nationwide’s latest figures add to growing evidence that house price inflation is finally coming back down to earth after surging to record highs in recent history.
“After taking seasonal effects into account, house prices fell by 0.9% month-on-month in October - the largest since the early days of the pandemic. However, house prices still rose by 7.2% year-on-year and while that represents a slowdown, it is still high by historical standards - and inflation isn’t helping matters.
“The violent gyrations in the money market in the fallout after the mini-budget in late September wreaked havoc on the mortgage marketplace, which started to filter through to the property market more broadly last month, with lenders pulling competitive home loans in anticipation of a higher interest rate environment.
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“More and more wannabe buyers simply can’t make the numbers work because of rising mortgage rates and runaway inflation, which continues to outpace growth in wages. For many buyers, rather than stretching too much now, it might be more financially prudent to wait until they are a bit more comfortable financially to buy. But there are no guarantees – the affordability squeeze could become more acute before easing, and personal circumstances might require you to buy a home.
“Those on the housing ladder and those reaching for the first rung will be awaiting the Bank of England’s decision on interest rates on Thursday with bated breath. A 0.75% increase in the base rate could result in mortgage holders on variable rate deals paying hundreds of pounds extra a year in repayments – depending on the size of their loan. While anyone on a fixed-term deal is currently protected from rate rises, those approaching the end of their deal are in for a nasty shock when it’s time to remortgage. Even those able to raid the Bank of Mum and Dad to bump up their deposit might struggle afford mortgage repayments.”
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