House prices fall

House prices fall by 5%. Good news for First Timers and Home Movers.

According to the Nationwide Building Society, houses on average have fallen by 5.3% in the 12 months to August 2023. If you’re looking to buy your first home or move up the ladder this should be seen as positive news. It may not sound like much but it does indicate the beginning of a trend that if continued may see the property market rising from the ashes!

The reason houses are not selling is down to the higher costs involved (mortgage interest rates) in servicing any loan taken out. Hopefully in the coming months we’ll also see rates adjust to a more manageable level too.

To give you a quick idea we’ve put a quick table together to show indicative monthly costs at 3 different purchase prices, we’ve used an average fixed rate and assumed a 15% deposit.

Purchase PriceLoan AmountTermFixed Rate periodLoan to ValueMonthly Cost
£117,647£100,00030 years5 years85%£563.36
£235,294£200,00030 years5 years85%£1,120.18
£352,941£300,00030 years5 years85%£1,676.11
£470,588£400,00030 years5 years85%£2,232.04
£588,235£500,00030 years5 years85%£2,787.96

Further Commentary on house prices

In the last two decades, the UK housing market has seen significant fluctuations. Notably, between 1997 and 2007, average house prices increased by 184%, while average wages only rose by 38% during the same period.

Recent data shows that property prices in the UK have been increasing faster than wages. In 2020, the average house price was £231,000, while the average full-time weekly earnings stood at £585, implying that a typical house cost nearly five times the average annual salary.

The impact on First-Time Buyers has been obvious. High property prices and the need for substantial deposits present significant barriers to first-time buyers.

In 2020, the average first-time buyer deposit in the UK was £57,278, a considerable sum for many aspiring homeowners. The UK government has introduced schemes like Help to Buy and Stamp Duty exemptions for first-time buyers to address affordability issues. However, these policies have faced criticism for potentially fuelling price increases.

The link between high property prices and rising rents is evident. In areas with expensive housing markets, tenants often pay a large proportion of their income on rent, limiting their ability to save for homeownership.

If we are to see a thriving housing market return prices of property needs to reflect clients incomes more and greater stability in interest rates.

What should I do now?

There are around 800,000 fixed rate mortgage products coming to an end this year, if you are one of those now is the time to act and secure a product that’s going to be affordable for you going forwards.

If your mortgage product is within six months of ending you can secure another now. Having secured a new product you can feel comfortable that you have something lined up, if the rates are cheaper when your existing product comes to an end you can compare what you have secured now with what’s available at the time and see which is cheaper.

If you’d like to learn more about mortgage products and how we can help you, please don’t hesitate to get in touch with our team. We’re here to help you navigate the ever-evolving world of mortgages and guide you toward a brighter, greener home.

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