It’s the million-pound question which every prospective house buyer is asking – are we headed for a price crash brought on by the cost of living crisis and rising mortgage rates? Although it would be lovely to have a crystal ball and know exactly what’s going to happen, nobody knows for sure. What we can do is to look at general trends and see what is the most likely scenario.
HM Land Registry Data
The government body in England and Wales which manages and records property transactions is HM Land Registry. Their figures show that despite the turbulence in the money markets and the rising cost of living, there were 4% more property transactions in August than in July 2022, and that the August figures were almost 10% higher than the transactions in August 2021. These figures are even higher than the pre-pandemic figures.
Race to Complete?
Many experts are of the opinion that the surge of transactions in August was probably due to people trying to get ahead of the market, and have their sales and purchases agreed before predicted interest rate rises in the mortgage market. With predictions of further increases in mortgage rates further down the line, there is every possibility that this trend will continue, with people desperate to get a transaction completed quickly.
This theory is also confirmed by figures from the Land Registry, which show that the average time from someone making an offer to the completion of the deal has gone up to around 5 months. Conveyancers and lawyers are dealing with both an increased volume of work, and ongoing delays at local authorities and other bodies involved in property searches.
Does it Matter?
The uncertainty in the housing market is worrying for people who are wondering whether now is the time to buy for the first time, or sell up to move into a different property. The scramble for available housing stock and the wish to complete quickly can led to a bottleneck at the conveyancing stage in the process. You can help things along by keeping on top of your relationship with your lawyer or conveyancer and responding as quickly as you can to their requests or questions. It’s also important to be realistic about what you can afford; most mortgage lenders will build in “stress tests” to their lending decisions to ensure that you can afford the repayments not just now, but should the rates rise further.
If you’re not planning on moving at any point in the near future, then the key thing to look at is your mortgage repayments currently, and work out how much you will have to repay should rates raise further. There are lots of online calculators which will help you do this. At a time where prices are rising and it’s uncertain what’s going to happen with other expenses such as fuel bills, it’s probably better to err on the side of caution and not overstretch yourself.