1 November 2022
If you are covering the Nationwide House Price Index, please see the following comment from Karen Noye, mortgage expert at Quilter:
"The long awaited house price dip looks to be upon us. The housing market has managed to withstand multiple blows over the past few years but every time it managed to shake it off and keep marching forward. However, it seems the impact of the mini-budget and the cost of living crisis proved too heavy for prices to keep rising and have dropped 0.9% month on month, according to Nationwide this morning.
"The cumulative impact of soaring inflation, energy price hikes and interest rates ratcheting up are making people less likely to want to move. As soon as the demand comes out of the market prices will drop and the uncertainty brought into the public psyche by the mini-budget will have made some think twice about buying a home at the moment.
"The outlook remains unpredictable and the severity of the downturn on house prices will depend on a number of variables. Since Hunt U-turned on many of Truss’ policies from her disastrous mini-budget the picture has become a little better and while the autumn budget might bring some personal tax challenges to everyone, the market reaction to it could ultimately help everyone down the line and bring inflation and increasing interest rates to a halt. However, in the here and now the amount people are paying on their mortgages is spiking and will certainly become unmanageable for some.
"One of the few policies from the mini-budget to remain in place was the stamp duty cut. If this continues the size of the house price drop might be lower as more people still opt to take advantage of this tax saving despite the economic backdrop. Similarly, the UK suffers from a serious lack of housing stock. This pumps up demand because there is so little available. This once again could make any house price fall softer.
"Many will be keeping a close eye on the weather over the next few weeks as so far we have had a very mild autumn. Once the cold draws in and heating has to be turned on the extent of the energy bill increases will really be laid bare. Add this to much higher mortgage rates and many people will at the least want to stay put and ride out the cost of living crisis with others wanting to move into cheaper properties. Less demand and more stock can only mean one thing and that’s a drop in prices."
