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Property Week analysis article

ended 24. March 2023

Following today's bank rate increase, a journalist at Property Week is writing an analysis piece and is keen to get your responses to the following questions:

  • What impact will today's rate hike have on the UK property market?
  • What will be the biggest challenges and opportunities for the UK property market in 2023?
  • Are there concerns in the UK property market over another financial crisis, following the bailouts for Silicon Valley Bank, Credit Suisse and Signature Bank? 
  • Might we see more bail-outs and, if so, could this see lenders batten down the hatches?
  • Can comfort be taken from the level of enthusiasm from international investors for London’s commercial property sector?

4 responses from the Newspage community

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Editor
Aaron Strutt
Product and Communications Director at Trinity Financial
So far the response from the mortgage lenders has been much better than expected with Nationwide and Clydesdale Bank lowering their fixed rates. Confidence in the property market and wider economy is a bigger issue with potential house price falls and higher mortgage rates putting many borrowers off from moving or getting on the property ladder. There is a lot going on at the moment from the cost of living crisis to troubled banks, and negative news ultimately makes people reign in their spending.
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Alastair Hoyne
CEO, Finanze Capital at Finanze Capital
Price stability remains the primary macroeconomic objective of both the U.S and the UK. We have seen the UK housing market cool slightly over previous months as the cost of borrowing has increased. As with the previous 10 base rate increases, those on variable rate or tracker mortgages will imminently face higher monthly mortgage payments. 5-year fixed rates remain lower than 2-year fixed rates, a stark contrast to what we have seen in recent years. One can conclude that lenders are expecting rates to fall in 2024, hence the discrepancy in pricing. The recent slump in housing transactions can be largely attributed to Q4 of 2022, due to the lag effect of data collection, it is only now that these figures are being observed. The increase has been widely expected by those across the financial services sector. As such, I expect to see little fluctuation resulting from today’s news. We still expect further increases to 4.5%-5% before we see rates start to come down.
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Jonathan Burridge
Founding Adviser at We Are Money
This rise was not unforeseen and there could still be more before inflation is reined in, but, if the smart money is right we are close to the end of the cycle and if inflation does start to fall later in the year then base rate is likely to follow. Having lost my shirt through the credit crunch, alarm bells rang over the failure of these banks. Speaking with those much wiser I am assured that lending institutions' capitalisations are much more robust and liquidity is not an issue. The banks that have failed have just been unfortunate in being left holding the hot potato when the music stopped. A small part of me thinks I have heard that before and the irony that Credit Suisse was bailed out by UBS, which suffered greatly after the Credit Crunch is not lost on me. 2023 will see challenges of affordably for borrowers which still may put downward pressure on house prices, which are currently stubbornly resisting significant readjustment.
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Jonathan Gordon
Director of Wealth Management at IP Global
Today's rate rise is likely to keep the sales market flat as many buyers wait for a reduction in rates and the associated borrowing costs. However, it will likely put further pressure on an already over-heated rental market as renters stay put.
In a sticky sales market, cash will be king allowing investors with more liquidity to bid down prices in exchange for a quick sale for those that need it. The lack of supply in many parts of the market will support prices meaning a collapse in the market is unlikely.
There does not seem to be a concern across the UK market so far about contagion spreading to the UK banking system. The wider opinion is that the recent banking failures have been attributed more to mismanagement rather than wider structural issues.