House prices and the mortgage market

Will there be a house price crash? Probably not is my thinking. Whilst waiting for my bacon sandwich this morning, I started browsing the local estate agents that are all clustered within a small area of my local town. I noticed that most of the windows were only showing a very small selection of houses for sale and, in some cases, the same house but with a different picture. This highlighted that it is still a sellers' market as the lack of stock was startling. Yes, mortgage rates have increased dramatically, along with all household bills, so affordability is going to be a challenge, but the extreme lack of stock will likely prevent a crash even if demand drops off. Without doubt, the housing market will stabilise and the rate of price growth will slow, perhaps considerably, but as always prices will start to go up again once the economy shows some signs of stability. People will always want to buy property, just as many of us will always want to buy bacon sandwiches.

I've been saying it for months as people waxed lyrical about doom and gloom of some imaginary property price crash: the biggest factor in property price inflation is the availability of mortgages. Give people the opportunity to borrow more money and pay it back over 30-40 years and they'll borrow anything to get the property they want. With more and more lenders increasing their maximum loan sizes and making criteria more flexible in the past 12 months this was a major factor in pushing prices higher and higher. Now that dozens of lender have withdrawn all products, this could be the catalyst for a cliff edge drop.

House prices will fall. Demand is driven by how much people can afford to borrow, not by how many people want to buy a home. They'll not be able to afford as much, therefore they won't be able to offer as much, causing prices to fall. The worm has turned. It's a buyer's market now.

I'm hopeful that lenders will return to market later this week or the start of next week. We've been told these changes are due to the fact that they do not have a clue what is going on with the mini-Budget and Bank of England. They need to see the lie of the land in order to make the right decision about their rates and that's exceptionally difficult right now. This will likely mean higher rates, and maybe a few days/weeks of less products, but I still have faith that they will return once the MPC give us a better idea of what they will do.

In some areas there will very possibly be a crash, in others prices will stabilise, and in other areas still prices could increase. The type of property will also play a role in how it fares in the weeks and months ahead. While owner-occupied property prices are likely to fall due to the reduced availability of mortgages and liquidity, we will likely see a big shift upwards in the value of rental accommodation. People still need somewhere to live, and if they can't buy, they have to rent. If the demand for rental properties increases then so do the rental payments, which in turn increases the yield, resulting in an uplift in the value of the rented property. As mortgage products come to an end, it appears to me that homeowners have two choices. They move onto a new product with the same lender and suffer the inevitable increase in payments or they sell out at a below market value and move into rented accommodation. Either way it is another ill-thought out act of self-harm that won't impact Truss, Kwarteng or their cronies, in fact they will likely be sat perched on a withering tree with the other vultures waiting to capitalise on the misery of the masses.

Many of our clients are in a Mexican stand-off between pulling the trigger on a property transaction and fleeing the market altogether. So many are unsure about whether to proceed. We have a mixture of clients who are rushing to get their applications in, and others standing off and waiting to see what the future holds. It's impossible to know where prices will be in a year's time. All we know is that there is a ridiculous amount of uncertainty thanks to last week's mini-Budget.