Buyers on Edge: Real-Term Price Drops and Mortgage Approvals Hit Two-Year Low
House prices have suffered their first annual fall in real terms since 2012, and it is more than just a statistic that is giving potential homebuyers the jitters. Meanwhile, mortgage approvals for new and existing homeowners have tumbled to their lowest in two years.
The latest numbers tell the story: nominal prices may be flat or rising, but in real terms, prices are falling. Buyers aren’t being held back by affordability concerns due to prices being prohibitively high. Instead, the increasingly tight credit market, higher interest rates and rising buyer apprehension over where prices are headed are all factors. Lenders are being extremely cautious, and the pace of mortgage approvals has plummeted. What we’re seeing is a market of very cautious buyers, rather than a frenzy of activity from those rushing in to buy before prices spike.
This is more than a dip in the housing market, it is a change in direction. The Spring Statement indicated now was not the right time to carry out any major changes to housing policy, and instead that this is an opportunity to test the market and see what the reaction is. And it seems the way that people are reacting to the housing market at present is much like a low tide which exposes a whole range of rocks in the shallows.
By MATTHEW HERNANDEZ, SPECIAL TO THE TIMES Mortgage financing is a bit more fragile. Prices are a bit less inflated. And homebuyers have to navigate a more complicated landscape. The housing market is not quite the whirlwind of a few years ago, when buyers and sellers were thinking and acting in barely more than a flash. Now it takes a little more thought and planning. These are lessons that many homebuyers have long since learned. And there are many more who are finding out just how important time and preparation can be.
The economic outlook remains uncertain. Meanwhile, despite Bank Rate cut hopes being continuously deferred and gilt yields being on the rise, borrowing doesn't appear to be becoming any cheaper. Many are awaiting the Monetary Policy Committee meeting on 19th March with baited breath in the hope of some better news for those who are currently tracking the mortgage market and embarking upon a home purchase.
Practical Takeaways for Buyers:
- Get your finances sorted, as mortgage approvals are proving tough at present, and make sure all necessary documents are to hand.
- Do not rush to make a purchase, with current market conditions providing a great window of opportunity to negotiate the best possible deal and to start a countdown to move-in for new builds that can be agreed with more flexible terms.
- Mid-March MPC decisions to bear in mind: Rate changes could be the decider.
- Lock in a fixed-rate mortgage to prevent future rate hikes from increasing your monthly payments.
The Final Takeaway
This market is less about speed and more about savvy. Buyers who prepare, stay patient, and keep a watchful eye on the economic signals will be the ones who navigate these choppy waters with confidence.
