[WEST WICKHAM, 23/06/2023] - Typically, April marks the beginning of the house-buying season in the UK, characterised by a surge in demand for homes and a plethora of property ads in the weekend papers aimed at attracting potential buyers. However, this year is different. As per the latest update from the Bank of England, in April, repayments on existing mortgages exceeded new loans by £1.4bn—an unusual occurrence. Since records began in 1993, this is the lowest figure observed, except during lockdown.

A Decline in New Mortgage Approvals

In April, there was a decrease in the number of new mortgage approvals compared to the average number in the five years before the pandemic. This may be due to several reasons, including the fact that low mortgage rates led to increased property prices in the two years following the start of the pandemic. Consequently, it has become more difficult for new buyers to purchase their first home. Additionally, the pause in the property market happened simultaneously with an increase in interest rates and a slowdown in the economy.

Smaller Reductions in Home Prices

According to the Nationwide building society, house prices have only dropped 3.4 per cent compared to last year, which is not a significant decrease. However, this has still been the largest fall recorded since 2009 during the global financial crisis. The housing market is expected to continue slowing for the rest of this year and possibly beyond if the expected interest rate cuts from the bank don't happen until 2024.

A Decline in Nominal House Prices

It is reasonable to anticipate that nominal house prices will decrease by at least 10 per cent and will result in a real terms decline of more than 20 per cent considering inflation. Even though it is a considerable fall, it is a positive development.

Lack of Other Investments

It's worth reiterating that there is a misguided belief in the UK that significant increases in house prices are beneficial. However, this is different. Over-investment in housing often results in less investment in other, more productive capital uses. Moreover, the constant economic upswings resulting from consumers utilising equity from their inflated properties for expenditure purposes are always succeeded by downswings.

Older individuals often benefit from rising prices, while renters and young people tend to be negatively affected. Those under 35 and saving for a flat deposit would welcome a decrease in house prices.

About Allen Heritage

Allen Heritage is a highly sought-after agent for sellers and landlords in the UK. The company has prominent corner locations that provide great local exposure for its clients. Allen Heritage is known for building long-term relationships with its clients and having expert knowledge of the area.

For more information, visit https://www.allenheritage.co.uk.