Agents Still Positive Despite Warnings About the Housing Market’s Lost Momentum

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A prominent UK banking society have released their August House Price Index and it has revealed that house price growth has slowed down but still remains in double digits.

The UK annual house price growth has slowed from 11% in July, to 10% in August. The monthly UK house price growth was up by 0.8% to an average of £273,751.

Robert Gardner, chief economist for the banking society, said “There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer enquiries in recent months and the number of mortgage approvals for house purchases falling below pre-pandemic levels.

“However, the slowdown to date has been modest, and combined with a shortage of stock on the market, has meant that price growth has remained firm.

“We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set remain in double digits into next year.

“Moreover, the Bank of England is widely expected to continue raising interest rates, which will also exert a cooling impact on the market if this feeds through to mortgage rates, which have already increased noticeably in recent months.”

More pressure is being added to household budgets since the announcement of the energy price cap being increased as of October this year.

Homes with the lowest energy performance could face bill increased of £2,700 annually.

Properties that are rated A to C will see a £1,000 increase, and for D-rated homes, bills may increase by £1,250

The rise in the energy price will affect first time buyers will need to save more money to be able to afford these price increases.

James Tucker, founder of Twenty7Tec, said: “The energy cap rise will eat into first time buyers’ attempts to save for their house buying deposits, and it will hit those who have already purchased houses.

“Today, an average buyer will be purchasing a home worth £283,154, with a deposit of 23.75%. 

“They’ll be going for a 28-year mortgage and, at the best rate available for them in the market, will be paying £1,004.03 per month for a repayment mortgage.

“The new energy cap increase is going to hit first time buyer households to the tune of £2,110 per year compared with this time last year – equivalent to two whole months’ mortgage payments.”

Even with the potential effects of the increase energy price cap, first-time buyers are continuing to drive the housing market. They account for more than two-thirds (177,000) of all property transactions in the UK.

The energy price cap increase has become one of the many price increases which has resulted in the cost-of-living crisis.

Property analyst Neal Hudson, of BuiltPlace, said the economic situation is “getting scary.”

He goes further to explain that there has been a lack of government support for the cost-of-living crisis, especially for energy costs, as well as increasing interest rates will hit the housing market immensely.

Hudson said: “We expect the impact of higher mortgage rates and the rising cost of living to be seen first in lower activity levels.

“However, the scale of the crisis and the absence of any significant government support makes a large fall in house prices increasingly likely.

“As prospective buyers start to struggle to borrow enough to meet the high price expectations of sellers, activity levels will fall (we are intrigued to know how lenders are adjusting their affordability tests to account for the cost of living crisis).”

Although many see the UK housing market with a gloomy outlook, agents insist that the housing market is simply catching up with the wider economy, particularly if buyers are trying to secure mortgage rates before they rise further. 

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