And we should also remember, as around 80% of people are currently on fixed rates, many won’t be affected by the rises yet and some may be insulated for the next few years. At the same time, anyone who has a fixed rate coming to an end within the next six months should be contacting their mortgage broker now to find out the best steps to take for their personal circumstances.
The property market is very individual to you and your property
For anyone looking at buying, selling or remortgaging, things are certainly tough at the moment because of the amount of economic and market uncertainty. Even as we write, the new Chancellor has not only scrapped many of the mini-budget changes, but also hinted there will be harsher changes to come. The one positive note is that this may mean interest rates don’t go up as high as the 5% that is currently predicted, depending on the Bank of England’s reaction which we will be announced on the 3rd November 2022.
But when you look at the property market, whatever average rises or falls are quoted or forecast, it’s important to understand that they are just blanket averages and rarely apply to individual properties. A good example of this is the difference in price growth between flats and houses.
Over the last few years, we have seen property prices reported as rising ‘on average’ at double-digit rates on an annual basis. However, when you look at the rise in flat prices, which are typically bought by first time buyers with high loan to value rates, versus houses, many of which are owned outright or with low loan to value mortgages, the difference is stark.
According to Zoopla’s latest research, the average gain in flat prices between March 2020 and August 2022 was 9%, while average house prices grew by a huge 21%. So, the current issues are far less likely to affect those owning a house, either without a mortgage or with a low loan to value, because of the increase in equity many of them have already enjoyed over the last couple of years.
However, first time buyers and buy to let investors reliant on higher loan to value mortgages are undoubtedly going to be impacted by the rate rises, and that could result in a drop in demand for flats and lower-priced homes. If that shifts the balance to an oversupply of these types of property for sale, we could see some price falls. Meanwhile, given that many people will still be able to afford houses, buying either mainly or entirely with cash, they could remain in short supply versus demand and be less likely to suffer the kind of price falls broadly predicted.