‘Storm clouds gather’ over housing market as mortgage rates rise

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According to surveyors, the housing market is showing a cloud of storm, with a rise in mortgage rates expected to push home prices downward in the coming year.

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The Royal Institution of Chartered Surveyors (RIX) said the market lost momentum in September, with new buyer inquiries falling for the fifth straight month.

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Limited supply of properties for sale is still supporting the modest price increase, but that is set to end as growth is markedly slowing, as indicated by Rick’s latest report.

With the outlook for interest rates and uncertainty taking their toll on the broader economy, the impact of rising mortgage rates buyers are expected to outweigh the boost from stamp duty cuts in the recent mini-budget.

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According to Moneyfacts.co.uk, the average two-year term mortgage rate on the market was 6.46% on Wednesday this week, while the average five-year fixed deal was 6.32%. Both these average rates are the highest since 2008.

As new sell orders continue to decline, Rick said, the stock’s levels remain at historic lows.

Estate agents own only 34 homes on average, and the pipeline seems to have worsened, with the number of new market valuations declining overall.

Sales volume has been falling for five months in a row and is at its worst level since May 2020, during the early stages of the coronavirus pandemic.

The sales expectations of property professionals in the next three months and 12 months remain negative.

A net balance of 18% of property professionals expect home prices to decline rather than rise over the next 12 months.

He cited expectations of further increases in mortgage rates as a factor, Rick said.

In the rental market, there has been an uptick in tenant demand, along with a drop in landlord instructions, Rick said.

Consequently, near-term expectations point towards a further strong growth in rental prices in the coming three months.

Since lenders have been much more cautious through this cycle, with higher loan-to-value mortgages accounting for a much smaller portion of the lending book than before, this should help limit the adverse impact on the market.

Simon Rubinsohn, Rick’s chief economist, said: “The turmoil in mortgage markets in recent weeks has added to the rising level of economic uncertainty resulting from high energy bills and the widespread cost-of-living crisis in shifting the dial in the housing market.

“Even though the headline price balance remains in positive territory for now, the downtrend in near-term expectations for both pricing and sales is showing a cloud of storm. Looking ahead, the picture painted by Rick Survey has clearly shifted in a negative direction.

“How this plays out in terms of hard data will inevitably depend on the state of the mortgage market once it is settled, but it is difficult not to envisage further pressure on the housing sector as the economy adjusts to higher interest rates and The tight labor market begins to reverse.

“For now, mortgage dues and assets remain at historic lows, but they are inevitably going to move upwards next year, as pressure mounts on homeowners.

“However, as lenders have been much more cautious through this cycle, with higher loan-to-value mortgages accounting for a much smaller portion of the lending book than before, this should help limit the adverse impact on the market. should. “

Tom Bill, head of UK residential research at Knight Frank, said: “The era of double-digit price increases was already coming to an end, but the mini-budget is set to accelerate that process.

“Sentiment has been damaged as lenders struggle to fix rates, which marks the end of a 13-year period of ultra-low borrowing costs. While we expect downward pressure on prices, we do not expect the scale of the decline seen during the global financial crisis due to record-low unemployment and well-capitalized lenders.

Credit: www.standard.co.uk /

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