House prices: Will cost of living crisis finally bring prices down?

The property market has enjoyed a bumper two years – but as the cost of living crisis threatens UK households with heinous bills and skyrocketing inflation, it’s predicted the booming housing market will take a hit sooner or later. Jonathan Rolande, from the National Association of Property Buyers, said surging costs meant the continued growth many were expecting will no longer happen.

He predicted average house prices will now dip under the rate of inflation – effectively meaning a real-terms reduction.

He said: “Had it not been for the cost-of-living crisis and the impact of world events, 2022 would have been a bumper year for the property market with cheap, easily accessible mortgages and no let-up in buyer demand.

“However, 2022 isn’t shaping up as many had hoped and instead of a potential four percent to six percent rise this year, we will likely see much reduced growth, nationally of around two percent to three percent.

“This is lower in fact than general inflation will be, so in real terms, this a reduction. London prime residential will take a near instant hit thanks to sanctions on wealthy Russians. “

READ MORE: Why now is the ‘best ever’ time to sell your property

However, what has been a sellers dream is certainly not going to turn into a buyers market anytime soon.

House prices have still been rising in recent months, despite plateaued growth being predicted for the new year.

A mass shortage of supplies needed to build new homes, as well as the Stamp Duty holiday brought in during the pandemic, have all caused house prices to inflate astronomically.

The full brunt of the cost of living crisis is also yet to be felt, with the National Insurance tax rise and new energy price cap taking effect from April.

What does this mean for my mortgage?

Mr Rolande said: “As for buyers, owning is a long-term commitment and house-hunters must be willing to take downs as well as ups.

“There are still very cheap mortgages available so whatever happens to prices, the per month cost will still be lower than usual.

“The good news for sellers is that all the signs are there are plenty of buyers for every property and prices holding firm for now so it is still a great time to sell.

“But there’s no doubt that mortgages will become more expensive and harder to obtain in the coming months as interest rates look set to rise and the cost of living crisis forces lenders to look more closely at personal outgoings when calculating affordability.

“The majority of homeowners are already at a fixed rate so the immediate effects will be felt by new buyers.”

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