Did you know that we’ve just had the busiest July in the UK property market since 2015? According to a recent report by HM Revenue and Customs (HMRC), the number of residential homes that changed hands was an estimated 110,970 last month, that’s a 32.9 % increase on last year when it was recorded to be 83,520. The property market is complicated: it’s affected by a person’s circumstances and impacted by external factors, such as the cost of living crisis. The number of new buyers looking for a property has fallen since May, according to the RICS residential market survey, but what does the next few months have in store for homebuyers in Chelmsford?
Which buyers are driving the market?
It is clear that first-time buyers have been driving the property market. Zoopla House Price Index states that they account for 35%, of all transactions. Yet mortgage rates are certainly going to play their part in the coming months, as high rates will mean increased monthly payments at a time where people are looking to make savings in their monthly budget. Data from The Office of National Statistics’ latest spending survey shows that all households have been making adjustments and cutting back on those nonessential areas.
The influence of the pandemic is still prevalent, with homeworking allowing first-time buyers to look further afield into less expensive areas, thus needing a smaller deposit. Richard Donnell, director of research at Zoopla, said: “The housing market has been resilient to the rising cost of living so far. The new energy price cap will add to the pressure facing households, especially those on lower incomes. We see the recent jump in mortgage rates having a greater impact on housing market activity and prices moving ahead.”
For the first time since 2013, the average mortgage rate for remortgages and new purchases has overtaken the outstanding mortgage rate which was as low as 1% on a two and five-year fixed mortgage less than a year ago, but now more likely to be between 3 and 4%. When it comes to fixed rate mortgages, around 80 % of us now have the security of such a mortgage, with its set monthly repayments. Although 1.3 million fixed-term mortgages are due to expire this year, according to industry body UK Finance, which could push some homeowners into making tough decisions, we are already seeing some looking to downsize to help with the current financial pressures.
Are we heading for a crash?
Only a few weeks ago the Bank of England forecast a recession, although measures, such as the stress test, which were put into place after the 2007 financial crisis due to a torrent of reckless lending, are predicted to prevent a crash in the housing market, although prices may fall. “I don’t think there are going to be big price falls,” says Richard Donnell, research head at Zoopla.
What will the coming months bring?
There are storms ahead but measures put into place after the last crisis mean that the housing market is in a better place to handle what is to come. The pressures of the economy on our household budgets are expected to slow the rate of price growth in the second half of the year. Zoopla predict that there could be zero house price growth in the year ahead should mortgage rates rise above 4%. Should mortgage rates increase higher than 5% they anticipate that localised house prices will fall.
What we do know is that for buyers the market is about to cool from the frenzied period that we have recently gone through in Chelmsford. First-time buyers are still going to feel the pressure of raising the funds for a deposit especially with the cost of living pulling at all areas of their household budget. Space that has often been longed for is now being reassessed, as the price of heating a property is being considered by buyers when viewing a home. There are more considerations for homebuyers than ever before, and we are here to help you find that ideal home for now and the years to come.
If you are looking for a new home and wish to understand how the local property market is looking, then please give our team a call on 01245 835859.