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Despite falling house prices, buyers are still having trouble affording homes after mini-budget

The economy of the UK is currently experiencing complex and perplexing trends. It can be rightly said that the housing market is nothing more than a swamp, dragging citizens in mercilessly across the UK. Since the release of the mini-budget on 23rd September 2022, Britain has seen extreme hardships. A domestic financial crisis that resulted in increasing mortgage rates for millions of people was brought on by the government’s not-so-mini plan. The introduction of the budget was followed by a trail of unfavourable circumstances for the public, including the current house prices fall and reduced affordability of buyers. But fear not, as the top estate agents in Chesham can help you cut a fruitful deal.

What is the trend and status of house prices?

In November, UK home values dropped at their fastest rate in 14 years as rising interest rates made homes less affordable, according to Halifax.

A drop of 2.3% in prices was witnessed for the third time in a row, according to the mortgage lender. The cost of a typical property in the UK is currently £285,579, making it the lowest price since March.

House price inflation in London also decreased in November, slowing from 6.6% to 5.2%. Prices in South East London are lower than the city average, with the average price of a home currently in London being at £549,160.

How have buyers been affected?

Despite property prices dropping more quickly, buyers are finding it more challenging and strenuous to afford houses. With rising affordability pressures on homebuyers, anticipated home moves have been put on hold. Industry data also continues to point to a large number of buyers and sellers taking stock as the market continues to stabilise. The affordability of buyers has been affected due to a number of economic reasons:

  • Inflation

Britain’s inflation has increased along with much of the rest of the world. Therefore, the Bank of England is continuing with a series of interest rate increases. That has made the financial situation of borrowers worse. A day before Finance Minister Jeremy Hunt announced “strong but necessary” tax hikes and budget cuts to manage price growth, data indicated that rising household energy bills and food costs have driven British inflation to a 41-year high. This is putting an additional burden on citizens as they would first and foremost worry about sustainability and basic survival than opting to spend on a new property.

Moreover, inflation has led to an increase in the interest rates provided by banks. As mortgage rates reach soaring highs, further interest rate rises are having a detrimental effect on the market. In fact, about half of the mortgage programmes available to first-time buyers or those remortgaging were withdrawn as a result of the mini-budget and the increase in bond prices. As a result, costs witnessed an increase for many mortgage-holding households and are creating hurdles for first-time buyers. Experts have cautioned that UK homeowners are particularly vulnerable because many have mortgages that mirror central bank rates or have short-term fixed arrangements which are about to expire.

  • Recession

House prices often stagnate or fall during a recession. They typically decline during periods of severe and protracted economic downturn and rising unemployment.

The UK will see its longest downturn since the 2008 financial crisis, according to financial analysts. Because of the global financial crisis fueled by the Ukraine-Russia war, there is now less mortgage financing available, which makes it much harder for consumers to borrow money and lowers housing demand. The housing market did not start to rebound until 2013, moreover, in a regressing economy, prospective homebuyers are most in danger of losing their jobs. The current recession seems to be following the same pattern to some extent, impacting house prices and buyers’ affordability.

Conclusion

As household finances continue to be under stress from inflation, housing affordability for prospective buyers and home movers has become significantly more troublesome, especially in South East London. However, with adequate assistance from good estate agents, buyers can make the most of the falling house prices. Get in touch with our highly professional estate agents for more details.

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