There might not be a better indicator of the future of the housing market than straight from those experiencing it daily, the estate agents. The latest survey data from the Royal Institution of Chartered Surveyors (RICS) reveals the agents are less optimistic than they have been in 14 years. The house price balance, which measures the percentage of rises and falls of home prices forecasted by surveyors fell to minus 68 in August, which is further down from the minus 55 recorded in July. This reading on the future performance of the housing market is the lowest recorded since 2009 and lower than the predicted minus 56 recorded in a poll by Reuters of economists.

There are not only fewer buyers in the market due to higher interest rates and remaining higher house prices, but there are fewer inquiries from those beginning their home shopping experience.

RICS chief economist, Simon Rubinsohn, remarked about the survey revealing a “sluggish housing market with little sign of any relief in prospect.” He added, “Buyer inquiries remain under pressure against a backdrop of economic uncertainty and the high cost of mortgage finance.”

Borrowing has become more expensive as the Bank of England’s Monetary Policy Committee (MPC) has increased the standard base interest rate during each of the last fourteen consecutive meetings since December 2021. At the end of 2021, the base rate was at an all-time historic low of 0.1% due to the impact of the pandemic, and now the rate is 5.25%. 

The next meeting of the MPC is scheduled for 21 September and the result will likely be another rate hike. The expectation is for a 0.25% increase, which would take the rate to 5.50%.

With mortgage costs higher, home buyers will likely find it difficult to afford their hopeful purchases. First time home buyers are not only facing higher borrowing costs, but also the remaining higher asking prices brought on by the pandemic. Saving for a deposit is also more difficult while dealing with inflation. 

Many first-time buyers have been turning to family members to help in buying their starter home. The help has come from extended family beyond Mum and Dad and has gone on to include friends as well. The difficulty for some to reach the property ladder has required help which also exposes that the housing market could be on the verge of a slump as affordability issues continue.

The only optimistic factor for home buyers is the newly emerging competitive market in lending. With less borrowing demand, lenders have become more competitive for the attention of home buyers and remortgage seeking homeowners. Despite the expectation of an increased rate by the MPC, lenders have offered new products with lower rates. The cuts could be temporary, which is why those looking to take advantage of the opportunity should act sooner rather than later in shopping for a mortgage or remortgage.

The MPC meeting will, as stated, likely end in an increase to the standard base rate, what is unknown is how many rate hikes are to come and what the peak will be before increases cease. Experts are divided on what will be needed to tame inflation. The latest report on inflation put it at 6.8%, which is more than three times the target set by the Bank of England of 2.0%. 

There have been statements made by MPC members concerning the base rate. Some believe the rate needs to be aggressively increased until target is reached to keep inflation from setting in while others forecast peak will be met with the next rate hike. 

For home buyers or homeowners hoping for their best borrowing deal, a downward trend in interest rates is not expected. Inflation will likely be with the economy through next year according to experts. Borrowing will not return to the historic lows of the pandemic, but savings could still be found by shopping around for the best deals available now.