The housing market; November 2022
To help curb the current inflation and cost of living crisis, the government and Bank of England have increased the interest base rate to 3%. Thereby reducing overall demand for products and services within the country, hopefully driving prices back down. However, mortgage interest rates are linked to the Bank of England’s base rate. This means that when the BoE (Bank of England) increases their base rate to reduce inflation, the cost of borrowing to purchase a home goes up.
The BoE base rate has been below 1% since February 2009 and was 0.1% in December last year, compared to an average of 4.8% between 2000 and 2007. Whilst the war with Ukraine and Covid-19 definitely played a part, it can be argued that it was inevitable that BOE base rate would start heading upwards.
We have been lucky to have had it this low for so long – borrowing money isn’t free! House prices increased rapidly during the pandemic, many believe it is reasonable to say they have now peaked. Therefore, based on the economic supply and demand model, more expensive mortgages may mean that the demand has been reduced.
The Office for Budget Responsibility (OBR) predicts an average drop of house prices of 9% between now and autumn 2024. Of course, there is significant uncertainty in this prediction given the sensitivity of the market and mortgage rates. Whilst this may sound like relieving news for first time buyers, many who are looking to sell their current home and move have less purchasing power than they expected, following the reduction of the value of their current home.
However, that predicted 9% decrease is an average across the whole UK. The changes in demand will vary greatly across different towns, cities and boroughs. For example, some prime areas in central London, like Kensington and Chelsea, have seen significant price increases in the last 12 months. Despite all of this, North West London continues to be an area of choice for many to purchase homes, both to live in and buy-to-let. Within Roundtree Real Estate core areas of Hendon, Golders Green, Finchley and surrounding areas, we have not seen any substantial changes to demand so far, we still have people looking to buy a home just like yours! Whatever your requirements are, whether you’re looking to purchase a new home, sell your flat or rent a house, we are positive we will be able to help. Whilst nobody knows for certain what the next year will bring, we remain sure that we can find your next home!