Market Update

After all the goings on of the last couple of weeks and the continuing uncertainty surrounding the UK economy, we felt it was time to sit down and put together a blog post to talk you through our thoughts on the market and what we might expect to happen in the short to medium term. As part of this, we sat down with some local experts in the mortgage market to get their view.



Of course, anyone who tells you they know how the market will be in two, four or six months time is lying or guessing! We can draw on our experience of previous economic shocks, most recently from 2008-2010, but these are a different set of circumstances and we don't have the benefit of hindsight that we have when looking back to the credit crunch period. As we came out of the summer, it was starting to feel like we were past the peak in terms of activity and demand levels with that particular curve starting to flatten. Demand continues to outweigh supply in many sectors though and based on the principles of good old fashioned economics that should stabilise prices. We can’t ignore the changing cost of borrowing though and we have certainly been brought out of what has been a very prolonged period of historically low mortgage rates, as demonstrated by this chart below from The Guild of Property Professionals using Bank of England data.

Cost of borrowing - Bank of England

Interest rates have risen sharply and many mortgage products have been withdrawn. The big question is how long this period of uncertainty will last.


“Whilst the current mortgage market has seen drastic changes in a very short space of time, once lenders have reassessed their products we will see lots of them come back to market, albeit at a slightly higher interest rate than before. It may be that mortgage rates are higher than the historic lows of the past few years, but in a couple of years the expectation is that, all being well, they will come back down a bit as economic factors start to balance out. If we look at the bigger picture, this a short term bump in the road and the expectation is that things will settle to a more manageable level.”



It means the days of packed out open days, a dozen offers per property and sealed bids may be over for the time being. However, we're not quite ready to call an end to what has been a sellers' market. Estate Agent Today reports this well in their article here. Will this change further over the next few months? Perhaps, but the mortgage market has to free up a little before that happens to any major degree as a buyers market is only possible if buyers have options.



Anyone looking to purchase a new home, should and need to be looking long term. House market trends over time show a gradual growth and the effects of the 2008-10 credit crunch were relatively short lived for most. If you are planning to be in your new home for 2-5 years at least, there is still reason to be positive about things.

House price inflation over time A

House price inflation B




Of course, the current flux doesn't only impact on those looking to buy and sell. Anyone about to see the end of their current fixed mortgage term will know more than many the effect this is having on personal finances.


"The rise in interest rates is causing financial pressure on many households. If you are in a fixed rate then you do not need to act, but if your rate is ending with in the next 6 months it is vital that you contact a broker. A broker will review all your options in one sitting, and secure your new rate for you to commence as soon as your existing rate ends without penalty. It is anticipated that rates will increase to over 6% with all high street lenders in the coming weeks. Lenders do not want to increase rates any further as they understand the strain and financial implications it is having on their homeowners. They are committing to limit interest rate rises despite further increases to the Bank of England base rate being forecasted. They do not want homeowners to default on their payments."

It's fair to say that homeowners need to give this their full attention, and as Kate continued to say, "where possible, plan ahead and make overpayments where you can. Overpayments come purely off your capital and reduce your loan size when re-mortgaging. Always look for the best product when your deal ends as the majority of lenders offer free legal service removing costs a barrier for shopping around and changing lenders.



Rental demand remains very high. Of course, the cost of borrowing and legislative changes are giving landlords more to think about but good quality, well managed rental properties will do well. Bricks and mortar are still seen as a relatively safe investment amid the chaos of the financial markets, and that can deliver good, steady returns.


Whatever happens, we are here to guide you through the all aspects of the property market as we've been since 1969. If you have any questions or concerns, please give us a call or pop in for a chat.