According to the latest figures from the Nationwide building society, November saw the UK’s largest monthly fall in house prices since June 2020. The average price of a UK property fell 1.4% from October’s figure of £268,282 to £263,788. Despite this, the average property is expected to have increased in value by 10.7% over the course of 2022.
The recent fall in prices is regarded as being attributable to a number of factors, including higher mortgage rates as well as the general slowdown of the economy. The outlook for the UK economy is far from encouraging with GDP predicted to drop by an estimated 1.4% in 2023.
The percentage of take home pay being spent on mortgage repayments has significantly increased in the last few months, reaching as high as 45%, according to Nationwide. This figure traditionally hovers around 30%. The average interest rate on a five year fixed mortgage is currently around 5.9%, a considerable increase bearing in mind that in October 2021, the average was just 2.55%.
Is it a good time to buy, sell, or re-mortgage?
When it comes to buying, some people, notably first time buyers, will be happy to see house prices fall. However, the fact that mortgage rates are on the rise could potentially counter any savings on the purchase price. The other thing to be aware of is that there is a possibility of falling into negative equity in the shorter term, should prices continue to fall. For the same reasons, investors who are looking at the long-term may be able to take advantage of lower prices.
In terms of selling, it really depends on how urgently you need to move or liquidise your assets. You may want to sell now before prices drop any further – after all, prices are still around 10% higher than a year ago.
When it comes to remortgaging, even though rates are relatively high at the moment, they could increase further in the next year or so (as the Bank of England is likely to increase rates further to control inflation). If you can secure a fixed deal at a rate that you think is competitive, then it may be worth considering.
The changing nature of the housing market can affect your property situation in unexpected ways, as can major life events such as marriage, divorce, or bereavement. Sometimes, you might need to look at amending the legal ownership status of your property. To do this, you may need to undertake what is known as a transfer of equity. A specialist transfer of equity solicitor from an expert firm such as Sam Conveyancing will be able to advise you on this process.
Looking forward
There is a general sense that property prices will continue to fall for at least the next year. The Office for Budget Responsibility (OBR) has predicted a drop of 9% between November 2022 and Autumn of 2024. It does, however, predict that prices will start increasing again in 2025, 2026, and 2027.
It is worth bearing in mind that there is significant uncertainty as to what will happen to the property market – due in large part to changes in general borrowing costs and mortgage rates during the current economic downturn.
