Every man for himself as housing market hits rocks - only advice is caution - TERRY FISHER
The UK's property market is facing a severe reckoning with anyone who has a mortgage facing unbearable pressures. It didn't have to happen, writes Terry Fisher.
The British property market is currently facing a perfect storm, with economists warning of an impending house price crash triggered by the mortgage crisis.
Years of low interest rates and questionable policy interventions have brought us to this point, leaving homeowners vulnerable to unaffordable rate increases and the market on the brink of a severe reckoning.
People are right to be more than disappointed.
Economists predict that house prices could plummet by up to 35 percent in a worst-case scenario. We’ve experienced a four percent decline already. It looks to be just a taste of what is to come.
The end of cheap fixed-rate mortgages for approximately 2.5 million borrowers will have significant financial ramifications and could send shockwaves through the economy.
The sharp surge in mortgage borrowing costs has set the stage for this potential crash, fueled by the reintroduction of higher-rate deals and revised interest rate forecasts.
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It’s easy to point fingers at the Government and the Bank of England.
While the decision to lower interest rates during the pandemic was necessary to support the economy, the central bank should have acted swiftly to address inflation as the UK emerged from the crisis.
The country's highest inflation rate among G7 nations, driven by factors such as rising energy prices, food bills, labour shortages, and weaker growth prospects, has exacerbated the mortgage crisis.
This failure to respond in a timely manner has left homeowners exposed to financial burdens.
The vulnerabilities of the housing market have been laid bare by this crisis. Over the past decade, house prices have skyrocketed due to low interest rates and excessive borrowing.
Consequently, housing affordability has hit a 150-year low, and if mortgage rates reach six percent more than half of people's incomes will be allocated to mortgage repayments.
The Government's policies, including the stamp duty holiday and the Help to Buy scheme, may have taped over the cracks but they have been accused of fueling house price growth.
Additionally, the prevalence of short-term fixed mortgage deals has left many homeowners susceptible to sudden rate shocks.
Homebuyers and sellers are the ones most directly affected by the mortgage crisis.
For potential buyers, this may present an opportunity to enter the market at lower prices, but the uncertainty and economic implications cannot be ignored.
The possibility of negative equity and difficulty in securing affordable mortgages loom large.
On the other hand, sellers may face challenges as demand wanes, causing prices to stagnate or decline.
The market imbalance between supply and demand, coupled with rising interest rates, is expected to persist, placing further strain on both parties.
It’s hard to give blanket advice in this situation. The landscape has become more complex than ever.
Every home buyer or seller will face their own unique problems during this time which cannot be so easily resolved. While the Government wants to “stick to the plan”, carefulness should also be our course of action.
The potential crash in house prices, driven by rising mortgage costs, inflation, and other factors, is a looming reality that could have been avoided with more proactive measures.
As the crisis exposes the vulnerabilities of the housing market and erodes affordability, homeowners, homebuyers, and sellers must navigate a challenging landscape that they’ve been placed in by no fault of their own.
Terry Fisher is a property expert at We Buy Any Home, the UK’s leading home-buying service, with a guarantee to purchase any property, provide a cash offer in minutes and settle funds in just seven days. For more information, visit: https://www.webuyanyhome.com
