Last week the Bank of England Monetary Policy Committee voted to increase the BoE base rate by another 0.5%, taking it from 1.25% to 1.75%. This is the sixth increase since December 2021, when the rate was just 0.1%. The Bank uses these increases to combat escalating inflation, which is being driven by factors like rising food and energy costs resulting from the Ukraine-Russia conflict. The BoE has publicly warned that Britain is likely to fall into a recession, anticipating inflation to rise to just over 13% by the end of the year. They expect it to remain at these levels through most of 2023 before falling again.
So what does this mean for the housing market? If you're wondering whether we're in store for an encore of the last housing market crash - we want to clear things up. The factors that made people vulnerable in the last crash - borrowing with 100+% mortgages and a high proportion of people on tracker mortgages for example - aren't the case today. These risks have been addressed, and today most borrowers are on a fixed rate mortgage - about 75% of the roughly 9 million mortgages outstanding.
This means that about 75% of borrowers are protected from the impact of this increase until they remortgage or decide to sell. Even for those who are in the process of buying - mortgage offers last 6 months, so many people will still be able to access a more favourable rate.
Of course, it's a different story for those on variable rate mortgages and First Time Buyers who haven’t yet secured a mortgage offer. These will be the people feeling the effects right away. But our point here is to bust any illusion that a crash in the property market is imminent, and that there will be a flood of good deals available as a result in the near future.
Reagan Bradley, our Operations Director, comments:
"I want to be clear that there is never a 'perfect' time to buy. I would liken it to the decision to have children – if you wait for the stars to align, it’ll never happen.
If you were thinking about moving in 2016, you probably decided to see the outcome of the Brexit referendum before selling. Then you may have held off until we’d formally left, but then that was delayed beyond all expectation. And then it made sense to wait until after the 2019 general election right? Once announced, it would have been prudent to wait for the actual Brexit announcement – because that was then only three months away. Fabulous – time to get your house on the market?
Well, then Covid happened. So 2022 would be a better time to move, right? But then you think, what if the base rates start to come down again? And now, what if the market crashes and I can pick up a really good bargain next year? And then we can look at who is going to be Prime Minister and what will they do for housing?! WHAT IF THERE’S ANOTHER GLOBAL PANDEMIC?"
The point is, we can forecast but we can never fully anticipate what might be around the corner - good or bad. If you have reasons for moving - a growing family, a better commute to work, a garden for the new pet, or even just a much needed change of scenery - don’t let the big "what ifs" take control of your life. The best thing you can do is fully explore all of your options, so you can move when it makes sense for you.
If you're questioning whether now is the right time for you, give us a call on 020 7644 2255! We'll be happy to talk through your options so you can make the best informed decision.