Nobody would want to make an investment and then watch it decline. This is certainly true for homeowners. Many would say they would like to see their home increase in value so that some day they could sell it and have profit in hand to purchase a bigger home, or perhaps downgrade and use the funds to retire. The most expensive purchase most people will ever make is with their home. It is supposed to be an investment. There is always supposed to be demand to keep the value climbing and the investment solid. However, a global pandemic thrown into the mix can have unforeseen consequences for those that invested in property with the hope of watching their investment work for them.

According to the latest forecasts from economists, inflation might have reached its peak. It has a long way to go until it is close to the Bank of England’s target level of 2.0%, but it is good news if they are right. Inflation and higher borrowing costs have been straining household budgets. One could question if inflation was being controlled by higher interest rates, then once it has indeed peaked should interest rates decline as fast as they grew, and the answer is not likely.

Another report concerning the UK housing market has revealed a decline in demand from home buyers. According to the Royal Institution of Chartered Surveyors (RiCS), recent sales and house prices declined in January. Not only is demand down, but supply remains low. The report revealed a net balance of -47% for new buyer inquiries. This level was the lowest since 2009 and the ninth consecutive month with a negative reading. Much of the blame for the lack of attention from hopeful buyers is laid on the higher interest rates facing borrowers and thus making buying a home much more expensive than just one year ago.

The UK housing market is set to experience an absence of buyers not seen in years. During the pandemic, rather than leaving the market due to lockdowns and other difficulties, hopeful home buyers adapted and sought out their pandemic lifestyle dream homes. The housing market flourished and supply could not keep up with demand in areas where there was plenty of space both inside and outside the home. The city life gave way to the cottage and country lifestyle. Now, with rising interest rates, and the standard base interest rate set by the Bank of England’s Monetary Policy Committee (MPC) at a 14 year high, inflation still in double digits, and a possible recession on the horizon, home buyers are expected to put off their homeownership dreams and follow a path of caution.

The expectation of falling property values has become more of a reality with the latest forecast for the mortgage lending market. Mortgage demand could hit a 12 year low as hopeful home borrowers find it more difficult to climb onto the property ladder. Not only are home buyers facing higher asking prices that remain from the rush to buy during the pandemic, but higher interest rates have become more expensive with the Bank’s rate the highest in 14 years. Saving for a deposit has also been hampered due to higher energy costs and inflation. Due to the difficulty in saving being impactful to so many, even the Bank of Mum and 

For the first time in 14 years, the Bank of England’s Monetary Policy Committee (MPC) has raised the rate to 4.0%. This past Thursday, the MPC voted to increase the standard base interest rate by 0.5%. It marks the tenth consecutive meeting the rate has been increased. Despite the meeting resulting in a base rate increase, there was some optimistic news such as inflation may have peaked and a shorter recession than expected is possible.