The UK housing market is set to experience an absence of buyers not seen in years. During the pandemic, rather than leaving the market due to lockdowns and other difficulties, hopeful home buyers adapted and sought out their pandemic lifestyle dream homes. The housing market flourished and supply could not keep up with demand in areas where there was plenty of space both inside and outside the home. The city life gave way to the cottage and country lifestyle. Now, with rising interest rates, and the standard base interest rate set by the Bank of England’s Monetary Policy Committee (MPC) at a 14 year high, inflation still in double digits, and a possible recession on the horizon, home buyers are expected to put off their homeownership dreams and follow a path of caution.

From September to December last year, the UK house price experienced a decline according to data from Halifax. By January, it was expected a greater decline was possible. However, the average house price remained mostly steady at £281,684.

The decline experienced in November at 2.4% was, according to experts, likely to be followed by further falls as interest rates were increased to smother inflation growth. Borrowing was far from the almost zero cheap borrowing of 2021 and home buyers were expected to turn their backs as the new normal of highly affordable borrowing disappeared.

The average house price is still higher than it was this time last year by about £5,000. The start of 2022 for the housing market was full of promise for sellers as low supply and cheap borrowing made home buyers financially fight for properties. Things have changed in one year. Inflation has grown, energy costs are higher despite a recent decline for petrol, there are still supply shortages, and borrowing is now much more expensive. The housing market outlook for 2023 and even 2024 is less hopeful.

Halifax has forecasted a drop in house prices of 8.0% for this year. Others have forecasted declines in double digits. This is a concern for the homeowners that have yet to build enough equity to support declining property values. Not only could many homeowners slide into negative equity with falling house prices, but they could lose the opportunity to qualify for the lower interest rate remortgages reserved for those with higher value in relation to their loan when trying to finance. A good loan to value level or LTV in which the loan is only 80% or less the value helps a homeowner save with lower interest rate offers when remortgaging.

There is also the concern for homeowners that affordability could become a major financial issue. Qualifying and buying a home when the Bank’s rate is almost zero and offers are 2%, or a little less or slightly more, is very different from interest rates offered now.

When a homeowner comes to the end of their current mortgage term, as many thousands if not more than a million will do this year, they will be able to remortgage or they will be moved to their lender’s standard variable rate (SVR). A remortgage will typically offer savings with a lower interest rate than what is offered with a SVR. Also, a fixed rate remortgage shields from further rate hikes that a variable rate does not and that offers more savings.

Being able to remortgage will be important to many homeowners, and doing so sooner rather than later could be a smart strategy. Some homeowners are even choosing to take on a penalty fee to end their current mortgage term early and remortgage with current rates rather than face higher ones later when their term was due to end.

It is easy to shop online for a remortgage to determine the best strategy. Going from one website of a remortgage lender to another could put quotes in hand to review. Shopping the website of a remortgage broker could be a one-stop online shopping experience with many offers from a variety of lenders obtained to review and compare in only minutes. Brokers could also have exclusive deals not offered to borrowers directly from lenders.

It might be helpful to take notice of the UK housing market despite being a homeowner and not planning to sell or buy anytime soon. It will provide insight to the expectations of property values. It will also give important information concerning the economy as the UK housing market is an important and strong sector of the economy.

Kim Kinnaird, Director of Halifax Mortgages, remarked on their recent report, “We expected that the squeeze on household incomes from the rising cost of living and higher interest rates would lead to a slower housing market, particularly compared to the rapid growth of recent years.

“As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand.”

She added some optimism for home buyers and homeowners, “For those looking to get on or up the housing ladder, confidence may improve beyond the near term. Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time.”