Sidestepping The Slump

Market analysts have stated that Britain’s housing market will avoid a slump, despite a zero-price growth, due to the bigger than expected fall in inflation. The National Office of Statistics (ONS) recently reported that inflation had fallen to 7.9%, down from 8.7% in May, now causing analysts to believe that the Bank of England’s future interest hike will not be as severe as once predicted, with predictions of a slight increase of 0.25% rather than 1%. This will now offer the 1.4 million Brits coming to the end of their fixed rate mortgages, a small relief that interest rates mortgages will not see another significant rise.

Recent data from Halifax showed that house prices throughout the UK witnessed their biggest annual fall since 2011. The average price of a home fell by 2.6% year on year last month and by 0.1% in June - the third consecutive monthly decline – now standing at £285,932 which is £8,000 lower than last August. A predominant factor driving the decrease in property prices is the lower level of demand caused by the Bank of England’s repeated interest rate rises, with the average two-year fixed mortgage rates now sitting above 6% according to Moneyfacts, whilst the average five-year fixed rate mortgage has increased to 5.67%.

In Q1 of 2023 forecasters predicted that the market would witness a decline in prices of up to 10% over the year in response to the rise in interest rates to 5%. However, Hannah remains confident that the market will not see such a drastic crash, this comes as the full in the consumer price index in June, will likely dissuade the BoE to further increase in the cost of borrowing.

David Hannah, Group Chairman of Cornerstone Group International, explains further: “Unsurprisingly, the analysts’ calls for a 10% fall in the UK’s property market has yet come to fruition and the news that inflation has fallen, means there is even less chance of this happening. This unexpected outcome has shifted the financial markets' outlook, eroding the belief that the Bank of England's base rate would reach its projected peak of 6.5%.”

“Looking ahead, we anticipate another positive response from financial markets when next month's headline inflation reading is unveiled. This potential outcome opens up an opportunity for individuals planning to refinance their mortgages in the coming months. They may be able to secure more favourable mortgage rates compared to the current offerings.”

“If this trend persists and is complemented by potential real wage growth, it could lead to significant changes in the housing market within the next six months. There might be a glimmer of hope for a rebound, painting a different picture for the housing market in the foreseeable future.”