Tuesday 19 December 2023
Zoopla recently released an article outlining three reasons why house prices haven’t tumbled, defying predictions for larger falls in 2023, here they are…
1: The economy is growing, albeit slowly, while unemployment remains low and incomes are increasing.
2: Lenders are supporting customers to refinance through longer term mortgages, interest-only mortgages and mortgage holidays, limiting the number of forced sellers.
3: Tougher affordability criteria from lenders have meant that while new mortgaged buyers may have been paying just 2% for their mortgages, they’ve still had to prove to their bank they could afford a 7% rate. That has meant that mortgaged buyers could afford higher rates as they remortgaged.
However, banks are now stress testing new borrowers at 8-9% rates, even though they're paying 5%, which is compounding the reduction in buying power and hitting sales.
Zoopla’s Executive Director of Research, Richard Donnell, says:
‘The housing market is adjusting to higher borrowing costs through lower sales rather than a big decline in house prices.
‘Assuming mortgage rates remain in the 4-5% range, we see UK house price growth remaining in the low single digits for the next 1-2 years, below the projections for growth in household incomes.’
This would mean that for the first time in ten years, house prices would start to become more affordable, increasing consumer confidence in making large purchase decisions!
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