House prices: Expert discusses 'interesting' pricing differences

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A surge in the value of homes on the market throughout the UK is expected to end amid the cost of living crisis and surging interest rates. It comes after two remarkably buoyant years, sparked by the suspension of Stamp Duty and lack of supply of new build homes.

Buyer confidence is getting lower as borrowing costs continue to climb and a looming recession puts people’s financial plans on hold.

As of August 17, UK inflation stands at 10.1 percent, up from 9.4 percent two months earlier.

This is expected to rise throughout winter and into 2023, with a potential peak at 13.3 percent in October predicted.

This is a sharper increase than the Bank anticipated in June, originally estimated at 11 percent.

It will continue to rise throughout 2023 only to eventually decline in 2024.

The continual erosion of spending power is one of the contributing factors to a predicted decline in house prices

Meanwhile, forecasts for the Consumer Price Index (CPI) are gloomier now, expected to decrease only to 9.5 percent in the third quarter of 2023, although the Bank anticipates a sharp fall in prices immediately thereafter.

Michael Hewson, Chief Market Analyst at CMC Markets, has said seller’s need to keep a watchful eye on the market in the coming months to see if a decrease in house prices comes along.

Mr Hewson told Express.co.uk: “Houses sold in June 2022 only increased in price by one percent compared to May, whereas, last year, this constituted a much more generous 5.7 percent surge.

“This is only the first month this year for prices to slow down at such a fast rate, so some caution before jumping to conclusions is advised.

“Remember, house prices may be slowing down, but they are not decreasing.

“Importantly, since this is transactions data processed at the time, it does not take into account the big leap in interest rates that the Bank of England announced later that month, let alone the even bigger hike in August.

“Therefore, despite the soaring inflation and rising consumer prices across the board, UK house prices appear to be trailing behind because demand for homes has generally come to a screeching halt.”

“Most buyers are weathering the storm for a few more months at least, while some are also working out how the cost of living crisis will pan out in the medium term so that the new mortgage is not squeezing their pockets beyond their comfort zone.”

Buyers are also being bombarded with advice to keep their money in the bank for the time being instead of making huge purchases – meaning less chance of a successful sale for those looking to get rid of their property.

Mr Hewson advised prospective buyers to “prepare” for higher than expected repayments that need to be factored in when looking for a home.

He continued: “For those still keen to get on the property ladder, there are plenty of fixed-rate banking products that can insulate them from the current spiralling interest rates on mortgages.

“They should, however, prepare for the possibility of being faced with higher-than-expected repayments once the fixed rate period expires, as the new variable rates are at the lender’s discretion.

“Fixed rates are not a cure-all either, as they may now be set to a higher level to start with.”

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