House prices in a market with rising interest rates

lookstraightahead

I think the market will carry on so long as prices are realistic. There's not the urgency by buyers anymore but there's still people who will buy if the vendor really wants to sell, irrespective of interest rates.
it's safer buying now than when house prices were inflated and interest rates were low. I think when those low fixed rates come to an end it will be more difficult for some.

caprikid1

spoovy said:

FTBers would tend to have the largest mortgages (I'm guessing), and the larger the mortgage the bigger the monthly cost increase from higher rates. So I would expect FTBer, lower-rung properties to take bigger hits.

That being said, who knows what crazy scheme the government have got cooking to boost prices before the next election. I'd guess another big H2B scheme, but who knows, they've even looked at allowing people to raid pension pots for deposits. Whatever it is though, it will be designed to *look like* it's helping FTBers most, so will likely boost FTBer-type property prices the most.

Actually this is often not the case, many FTB's are having single income mortgages or on low salary as we progress into our 40's many go for that dream home and stretch themselves. Consequently my first mortgage was less than £40K my current mortgage is considerably more !. The difference is though that first time buyers tend to borrow the absolutely max and have very little free cash in their income or savings leaving themselves vulnerable to interest rates. It is the affordability of the mortgage not the size.

Sarah1Mitty2

Grizebeck said:

I just wonder if some parts of the house market do better as a result of rising rates etc

The sellers prepared to reduce their prices quickly and decisively will do well, realistic sellers always beat out the competition in a downturn.

caprikid1

"The sellers prepared to reduce their prices quickly and decisively will do well, realistic sellers always beat out the competition in a downturn."

Depends on your definition of "Do well", if you mean throw you house into an temporary uncertain market for a bargain price and achieve a sale, then yes they will do well. Everyone likes a panic seller who believes the crashy fear, but surely even you have stopped believing in the great crash ??? 

Alderbank

Deleted_User said:

Higher interest rates cause lower house prices. 

That's quite a claim!
Do you have any evidence for that?

In 2016 interest rates were 0.25%. They are now 4.5%, 16x what they were in 2016.
So have these massively higher interest rates made house prices lower today than they were back in 2016?

Quite the opposite, prices are higher everywhere without exception.

fackers_2

Grizebeck said:

Just a random question here 
Where mortgage rates are rising does this in anyway drive up demand for houses at the "lower" end of the market? Is there any evidence in this from past mortgage hikes ?
Is it wrong to assume that people lower their sights when budgets tighten

The reason i ask if we have brought a "in between house" whilst we find what we want with cash in the bank for this new house and will either rent out or sell on the house once the new one is finished etc

Just check out rightmove. Tons of reductions! Almost 3/4 of search now show houses that have reduced asking price. Only going to get worse for the next 18months. Recon there’s another 10%. 

fackers_2

[Deleted User] said:

Interest rates are higher than before but by no means are they high by historical standards. The cost of renting is also high. I think people will still buy if they can, even if the higher interest rates gobble up some disposable income, because home ownership will still be the best idea for many . In the modern world, with both partners working, and in some cases with decent payrises, there is affordability. Nationally, there has been a slight downturn in prices in the past year, nothing that vendors would worry over,  and welcome for prospective buyers. In my local area, prices are on the rise.

Nationally? Not the Uk 🤣

Mortgage approvals have near halved in 2 years. It’s tough out there already. Some people seeing £300-800 on their mortgages. What you DONT SEE is land registry ACUTAL SOLD PRICES which is around 8 months behind time. 

[Deleted User]

Alderbank said:

Deleted_User said:

Higher interest rates cause lower house prices. 

That's quite a claim!
Do you have any evidence for that?

In 2016 interest rates were 0.25%. They are now 4.5%, 16x what they were in 2016.
So have these massively higher interest rates made house prices lower today than they were back in 2016?

Quite the opposite, prices are higher everywhere without exception.

As the latest land registry figures are for March I will use Nationwide's figures. 
Average UK house price Q2 2016 £204,238. CPI inflation adjusted that is £261,476 in today's money
Average UK house price May 2023 £260,736

Down 3.4% over the last 12 months the biggest annual fall in 14 years. 

Nationwide and Zoopla forecast a 5% drop in 2023

Lloyds bank and Halifax bank forecast a 8% drop in 2023

The Office for Budget Responsibility forecast a 10% drop by 2024.

Historically
Base rates May 1988 7.35%, October 1989 14.88%
Over 3.5 years real house prices fell 34%, nominal house prices fell by 20%

JacJac1

fackers_2 said:

Grizebeck said:

Just a random question here 
Where mortgage rates are rising does this in anyway drive up demand for houses at the "lower" end of the market? Is there any evidence in this from past mortgage hikes ?
Is it wrong to assume that people lower their sights when budgets tighten

The reason i ask if we have brought a "in between house" whilst we find what we want with cash in the bank for this new house and will either rent out or sell on the house once the new one is finished etc

Just check out rightmove. Tons of reductions! Almost 3/4 of search now show houses that have reduced asking price. Only going to get worse for the next 18months. Recon there’s another 10%. 

Yes, my Rightmove alert usually sends reductions on a Monday, and there are usually one or two only. Yesterday there were 12!  Hopefully more of this trend will follow.

[Deleted User]

fackers_2 said:

[Deleted User] said:

Interest rates are higher than before but by no means are they high by historical standards. The cost of renting is also high. I think people will still buy if they can, even if the higher interest rates gobble up some disposable income, because home ownership will still be the best idea for many . In the modern world, with both partners working, and in some cases with decent payrises, there is affordability. Nationally, there has been a slight downturn in prices in the past year, nothing that vendors would worry over,  and welcome for prospective buyers. In my local area, prices are on the rise.

Nationally? Not the Uk 🤣

Mortgage approvals have near halved in 2 years. It’s tough out there already. Some people seeing £300-800 on their mortgages. What you DONT SEE is land registry ACUTAL SOLD PRICES which is around 8 months behind time. 

My reference point for sold prices is Nationwide year on year fall. I am fairly comfortable then that I am making reference to the National picture.

Funny thing is I admittedly cannot see the land registry 8 months in future but you are implying that you can. Crystal ball stuff.