The housing market has shifted to a buyer’s market. It happened quite quickly if one considers the main reason is due to higher interest rates that were historically low less than two years ago. The Bank of England’s Monetary Policy Committee began the first of the recent series of increases to the standard base interest rate in December 2021. The rate then was at almost zero at 0.1% and was increased to 0.25%, For fourteen consecutive meetings the rate increased to 5.25% until last month, when during the September MPC meeting the majority vote was to hold the rate steady. In less than two years, the housing market went from a boom of record-breaking house prices month into month to the quickest decline in UK house prices in 14 years.

Where in 2021 and into 2022 sellers were asking prices that were the highest on record, buyers were able to stay in the market due to the ability to borrow at interest rates that were at their record level of historical lows. Now, in the final quarter of 2023, the housing market is different.

The recent report from Halifax revealed the UK house rates have fallen at the quickest annual rate in 14 years. The September average house price declined for the sixth consecutive month to £278,601.

Halifax has forecasted an expectation for the housing market to continue to have struggles into next year due to the current high level in prices and the higher cost in borrowing.

Kim Kinnaird, director of Halifax Mortgages, remarked on their latest report saying, “Activity levels continue to look subdued compared with recent years. Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.

She added, “With the base rate now likely to be at or around its peak, we are seeing fixed rate mortgage deals ease back from recent highs.”

Whether the current rate will turn out to be the peak rate for taming inflation is yet to be seen. Despite the confidence of some experts, including the Bank’s governor, Andrew Bailey, there have been comments that the MPC would not hesitate to raise the rate again, if necessary.

The target rate set by the Bank for inflation is 2.0%. The last report on inflation put the rate at 6.7%, down from the previous report of 6.8%. It is still more than three times the target rate and having been stubbornly high during 2022 and into the first half of 2023, it is not certain if 5.25% will keep inflation on a downward trend. 

It is this reason that some hopeful home buyers, including first-time buyers, could show up stronger than expected in the market during the holiday season. This is a time when many choose to buy a home. Reasons are many and can include wanting to spend the holidays in a new home to purchasing a home that will provide more affordable energy costs during the winter months. 

While first-time buyers are finding it harder to purchase due to higher interest rates and remaining high asking prices than would normally accompany the level of interest rates now offered in mortgages, they are finding ways to stay in the market. Some are turning to family, including Mum and Dad and other family members, as well as friends, to fund their deposits and purchases. 

They are also taking notice of often overlooked fixer-upper properties that have potential to become, after investing time and money, the dream home they cannot afford otherwise. The DIY culture is popular in social media, and many are willing to take instructions from others, experts, or newbies, to help them create their personalized home.

The housing market staying active is important to not only sellers, and others with careers associated with and on the outskirts of the business of people buying and moving, but to the economy, and to homeowners.

When house prices decline, so can property values. Homeowners are dealing with higher interest rates when shopping for remortgages and their property values matter. The better the ratio of loan to value of the property or the LTV, the better the interest rate offers and the better the opportunity for approval overall. Of course, there are other criteria, but property value matters and homeowners should stay alert as to the steady, increasing, or declining house prices in their area.

The next meeting of the MPC will be in November, with none held in October. This means there are days ahead in which a homeowner shopping for a remortgage or a home buyer shopping for a mortgage could take advantage of current lending opportunities.