House prices may be set to shrink
Britain’s biggest mortgage lender today warned of “significant downward pressure” on house prices over the coming months as soaring borrowing costs take their toll on the property market.
Halifax said average prices dipped 0.1 per cent to £293,992 in September — the month of Kwasi Kwarteng’s mini-Budget which triggered chaos in the mortgage market — but are up almost 10 per cent year on year.
The lender said prices had “defied expectations” this year but “the prospect of interest rates continuing to rise sharply amid the cost of living squeeze, plus the impact in recent weeks of higher mortgage borrowing costs on affordability” were likely to halt the market in its tracks.
Average two- and five-year fixed rates have rocketed over the past week after the Chancellor spooked sterling and the gilts market with his statement on September 23. Both are over six per cent, according to data from Moneyfacts, two-year fixes for the first time since 2008 and five-year deals for the first time since 2010.
Kim Kinnaird, director, Halifax Mortgages, said: “The events of the last few weeks have led to greater economic uncertainty, however in reality house prices have been largely flat since June, up by around £250. This compares to a rise of more than £10,000 during the previous quarter, suggesting the housing market may have already entered a more sustained period of slower growth.”
Ross Boyd, founder of mortgage comparison platform Dashly.com, said: “Those people who are currently locked into some of the lowest mortgage rates ever will already be hiding behind the sofa as this horror flick plays out. The rate shock will be extreme. The pending re-mortgage crunch will significantly add to the cost of living crisis and put further pressure on household finances. We are heading into a brutal winter, with confidence among buyers and sellers alike at its lowest level since the credit crunch.”
Prices in London went up more slowly than in other parts of the country, rising 8.1 per cent to £553,849, according to Halifax.
Matthew Thompson, head of sales at agents Chestertons, said: “The expectation that London’s property prices could see an adjustment led to an uplift in buyer demand across the capital last month. Compared to August, there were 17 per cent more buyer enquiries in September and 18 per cent more viewings.
“We are also encountering an increasing number of house hunters who want to secure a property as soon as possible and take out a fixed rate mortgage. This has contributed to September’s property market remaining busy and competitive. As the cost of living crisis is looming, some buyers are compromising on their priorities in order to secure a property under their initial budget.”
Latest data from Moneyfacts today shows rates rising still further. The average cost of a two-year fix went up from 6.11 per cent to 6.16 per cent, while five-year deals rose from an average of 6.02 per cent to 6.07 per cent.
The number of deals on the market rose from 2,430 to 2,533. The total stood at 3,961 on the day of the mini-Budget.
