I am a mortgage adviser – let’s address the elephant in the room

Well what a year 2022 has turned out to be. The elephant in the room seems to be that the purchase market is dead. It’s not.

Properties are still regularly coming to market and being sold close to asking prices. In short, people are still moving and listing their homes with agents. The real issue is that the confidence of first-time buyers is running very low, which has a knock-on effect on everyone else.

Combine this lack of confidence with interest rate increases, not forgetting gas, electric and day-to-day food costs soaring too, is it any wonder those living with their parents might be reluctant to take the plunge?

All this said, there has been a real positive change since the new prime minister was announced, because we are seeing lender interest rates reduce and some confidence restored. There’s still a long way to go, though, because previous reactions created an influx of business for those lenders that held better interest rates for longer, and this in turn has created some horrific delays in applications being processed. That said, some lenders are turning applications around in almost pre-pandemic timeframes.

I feel some stock-taking and adjustments should be made by those that are pricing aggressively when they cannot cope with the demand. On a house purchase this can be the difference between an agent and vendor feeling confident in the buyer or not. Home buying is stressful and this is exacerbating things. I feel lenders need to be held accountable on this in future.

I’ve been asked more than ever this year “what do you think property will do?” and “what do you think interest rates will do?” The honest answer is that I cannot predict it and nor can anyone else, not accurately enough anyway. There are too many variables.

I don’t see this horrific property price crash that’s being whispered about currently happening any time soon. However, what I do see is a market adjustment. I don’t think it could be back-pedalled enough, due to the high loan-to-value (percentage of the property value borrowed) levels of borrowing taken over recent years.

My feeling is that there will be a 10 to 15 per cent reduction in price at the top end, followed by balancing over time and an increase maybe bringing it back to a net 5 per cent reduction overall. However, this remains to be seen and could change.

I believe buyers will come back to the market stronger next year, and I feel the property market will become less of a sellers’ market, which it has been for an extended period of time now. The high property prices have slowed the first-time buyer market, and the ending of help-to-buy funding has meant a shift to shared equity and shared ownership options for many. Although often less attractive, these schemes will serve many well in getting into the property ownership market.

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With the yields on buy-to-lets narrowing significantly, changes to taxation for landlords and predicted changes such as minimum energy performance certificate (EPC) ratings, I can see the smaller landlords selling property and this bringing more options back to those first-time buyer markets. You have to keep in mind that the market in every corner of the country differs, and this sways further still between lower and higher-cost housing markets.

What next? Well I think that, with any secured lending, the consumer needs to lean towards experienced broker advice now more than ever and not make quick decisions. Planning smartly now will help in the future. Come January or February next year, I feel the lay of the land will be greatly improved and bank-offered interest rates might be lower than today as competition is still strong between them.

Would I buy right now myself? If I needed to move home, yes, I would still be looking. But if I did not have an immediate need, probably not, because I feel the new year will offer better insights into the future of property price and interest rate expectations.