Estate agents report that property sales are collapsing as lenders continue to pull mortgage offers – amid market turmoil.
It is estimated that increasing mortgage costs are set to hit the two million homeowners on a variable deal over the next few months – with many worried that they will be unable to afford the hike in payments.
Banks and building societies have pulled more than 1,000 deals from the market this week after analysts warned interest rates could hit 6% next year, up from the existing level of 2.25%, causing more misery for homeowners.
Commenting yesterday, economist Yanis Varoufakis said that the Bank of England had little alternative but to push interest rates to 6% in the near term in order to “stabilise the money markets in Britain”, but he added that it would “break like a toy the housing market”, as homeowners with mortgages struggle to cope with the rate hike.
Several property analysts have warned this week that home prices could fall sharply as a result of the financial turmoil.
Ian Wyn-Jones, an estate agent in North Wales, told BBC Radio 4: “What I’ve seen in the last 24 hours, a lot of my clients’ mortgage offers have been pulled, properties have collapsed in terms of the sales, chains have collapsed, it’s wiped a lot of cash from the pipeline.
“It doesn’t look good at the moment. We had about four properties yesterday where lenders just pulled their offers.”
Adam Feather, head of Robert Anthony Estate Agents in north London, concurred: “Falling house prices seem inevitable unless inflation suddenly drops – and fast.
“There are plenty of reports of property deals falling through, and this isn’t surprising. Unless inflation falls faster than predicted, it is highly likely that home prices will indeed fall – possibly by up to 15% over the next couple of years.”
In a dramatic week for the UK economy, the Bank of England was forced to step in this week and announce plans to start buying up bonds, with a view to avoiding a “material risk to UK financial stability” and calm money markets.
It was announced late last night that prime minister Liz Truss and the chancellor Kwasi Kwarteng will meet with the independent forecaster the OBR later today.
Comments (4)
The financial markets are pricing in a base rate of 6% for sometime next year. The issue is not the £’s fall against the $, the euro has also fallen. However things have got better since the beginning of the week. The issue is that many UK business model rely on low interest rates, this is coming to an end.
The market has been supported by a number of government schemes such as Buy to Let.Over the next year we will see the expiry of many mortgages that were fixed in the good old days of almost zero interest rates.
With a base rate of 6% we will see a lot of forced sellers trying to offload their debt burden. Many will struggle with mortgage payments. It will also become more difficult to obtain a mortgage. If there is a 10% fall in prices property owners with 90% mortgage will find it almost impossible to remortgage. In short FTB who bought using multiples of 5 to 7 times annual income be be financial wiped out.
If you think it’s bad now, wait and see what it will look like in 6 months time.
Sensationalistic rubbish. Eye why publish such articles when your next one was talking about NOT talking the market down?
Depending on where you are in the country. mortgage rates can rise to 6.89% before the cost of renting the cash to own a home from the building society (as a mortgage) is more than the cost or renting the same property from a landlord.
Again depending on where you are in the country that over simplified calculation ignores the trend-line rise in property values.
The capital repayment of a mortgage takes an actual monthly mortgage figure much higher than a rent but if viewed as a form of forced saving for the future its possible to see why some people achieve home ownership and others don’t
Nice to see the Greek financial guru comment on the perilous UK housing market !