Storm clouds gather over property market

House prices, mortgage approvals and transaction volumes on the wane.

Commenting on the ONS House Price Index, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The storm clouds are gathering over the property market which has suffered a triple whammy of negative developments, with house prices, mortgage approvals and transaction volumes all on the wane.

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“The market is clearly turning. House prices remain squarely on the downwards trajectory as the impact from the affordability squeeze from high mortgage rates and high inflation continues to filter through.

“The fall in house prices offers little reprieve from an affordability perspective because of surging mortgage rates. The latest ugly inflation data means that higher mortgage rates could be on the cards, which would spell even more mortgage misery for those at or approaching the end of their fixed-rate deals. As the mortgage affordability squeeze tightens its grip, house prices could sag further under the weight of an uncertain market and hesitant buyers.

“Aspiring homebuyers have found themselves in the clutches of a mortgage affordability squeeze not felt since the aftermath of the ill-fated mini-budget back in September last year and the subprime crisis, which erupted back in 2007, before then. As mortgage affordability wanes, prospective buyers are left with no choice but to step back from the fray.”

Rents

“The ferocious run up in rents exacerbates the plight of aspiring homeowner, leaving them with less money to save for a deposit to buy a house.

“Landlords at the end of their fixed-rate mortgage term are not immune from the mortgage mayhem triggered by market expectations that interest rates are going to rise even higher, and stay higher for longer. They will experience an instant increase in their outgoings to the tune of hundreds of pounds a month. There is a limit to landlords’ ability to bear increasing costs. As such, many will inevitably pass on the heightened cost burdens to tenants.

“It is becoming increasingly important for tenants to plan ahead to ensure they don’t find themselves in a position where they can no longer afford their rent.”