The housing market is evolving due to the higher borrowing costs as the Bank of England’s Monetary Policy Committee (MPC) raised the standard base interest rate during fourteen consecutive meetings. During the most recent meeting last week, the MPC kept the rate steady breaking the long streak of raising the rate. It rests at 5.25% and will remain so until at least the next MPC meeting in November.

In comparison to the interest rate when the housing market was booming during the pandemic and was almost zero at 0.1%, the difference in borrowing costs is steep. This has led to the absence of the strong demand of first-time buyers that had been in the market. As affordability has been an issue for many, they have had to change in their process to get onto the property ladder.

Some have had to turn to family members and friends to give financial assistance for deposits. Others have had to put their ownership on hold for the moment. 

During the low interest rate buying period of the pandemic, first time buyers stepped away from the usual starter homes and were able to shop homes that would have been considered more of an upgrade from a starter home. This would not have been possible without the then historically low interest rate mortgages.

Now with higher interest rates, fixer upper homes have become more attractive to first-time buyers. 

The change of the economy can often dictate a change in the trend of the housing market as to what is in most demand from buyers and not just due to affordability. Before the pandemic, city homes were the focus and when the pandemic created a desire for more personal space as work from home became a norm, cottages and country homes became the pandemic dream house. As the height of the pandemic faded and things shifted toward normal, city homes became once again the sought after home purchase.  

The ability to do more DIY projects due to home improvement stores and social media quick instruction and inspiration videos, home buyers are more ambitious and see overlooked properties as a diamond in the rough. It might not be the home of their dreams when they first move, but it will become their dream home later. 

The fixer upper opportunity could be the way to keep first-time buyers in the housing market. Not only could it keep the market viable, but it could bring value back to the properties as well as the areas where they are bought. It solves problems of the lack of the ready to move into homes in inventory within the housing market and brings demand for jobs in construction and home repairs that DIY homeowners feel best left up to the professionals.

While things have changed from when the housing market was breaking records month after month due to cheap borrowing, there is very little reason to believe that it won’t prove to be resilient. Some correction will occur, which many economists believe is a natural need for the market. However, the expectation of a total freeze or bust in the market is not likely the gloom and doom outcome some have predicted. 

Resilience in the housing market will be good news for homeowners in fear of going into negative equity. It had been a threat for many new homeowners that could have suffered from the dropping of house prices which could lead to a decline in property values. Without positive equity in the property, homeowners would be without the opportunity to remortgage. 

Because the MPC will not have a meeting until November, and due to the competitive lending market lowering mortgage rate offers, home buyers will have more time to take advantage of the opportunities that have been created by the current economy. It certainly will be good if they do, especially for home buyers with DIY pursuits, as it will help communities, home sellers, homeowners, skilled laborers, and the economy.