The housing market has proved resilient throughout 2022 so far, with average house prices climbing in August, although at a slower rate than in more recent months, and a dip during July. However, The Guardian reports that high street lenders are warning of more challenging times ahead, as the cost of living crisis and interest rate rises begin to bite.
Housebuilders Barratt Developers have thrived during the pandemic-fuelled housing boom, raking in over £1bn of pre-tax profits. However, they have warned that new home reservations are now at lower levels than before the pandemic, and that price growth was slowing.
Interest rates are currently at 1.75%, which is the highest level for 13 years. The Bank of England (BoE) is set to meet again in mid-September, to review the monetary policy. It is widely predicted that interest rates will be raised yet further, increasing the cost of mortgages for first time buyers.
Kim Kinnaird, the director of Halifax mortgages, told the publication: “House prices have so far proved to be resilient in the face of growing economic uncertainty. Industry surveys point towards cooling expectations across the majority of UK regions, as buyer demand eases, and other forward-looking indicators also imply a likely slowdown in market activity.”
She added: “With house price to income affordability ratios already historically high, a more challenging period for house prices should be expected.”
Industry insiders are predicting that house prices will flatline by 2023, as the UK weathers the incoming financial storm of soaring inflation, higher interest rates, high energy bills, and sluggish wage growth. However, the price of renting is expected to continue rising, amid a shortage of rental properties and increased demand from tenants.
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