The final months of the year are going to shape the housing market data and will likely reveal a shift in the market that was inevitable due to more expensive borrowing from higher interest rates. According to Zoopla real estate company, the volume of houses sold in the UK this year will be the lowest annual figure since 2012. The forecast is for a 21% decline in sales for 2023 compared to 2022. 

Zoopla reports the sales for 2023 relates to a household moving every 23 years. It is an increase of six years in comparison to 2021 data.

Demand for homes in the last four weeks has declined by 34% in comparison to the average for the last five years. Inflation and higher interest rates are being blamed for falling demand in the housing market.

The average house price reported by Zoopla is £288,000, and while £5,000 more than the same time last year, it is still below the peak month in 2022 of November which was £5,000 higher.

Sales still occurring in the housing market are fueled by cash buyers. They are not impacted by interest rates and are therefore not likely to be put off by higher rates and remain active in the market. According to Zoopla, cash buyers will account for one in three sales for this year.

The number of mortgaged sales for 2023 could decline by 28%.

According to experts, the threshold for affordability in interest rates has been passed. Fewer home buyers will be in the market and there is an expectation that the declines seen now could be much greater in the months ahead.

Inflation is expected to be an issue for the UK economy through next year. Target rate is 2.0%, and it was last reported over 6% which is three times higher than what is desired by the Bank. 

More interest rate hikes are therefore expected, and the next meeting of the Bank of England’s Monetary Policy Committee (MPC) will likely result in an increase of 0.25% as occurred in August. The next MPC meeting on 21 September could end up the fifteenth consecutive meeting that resulted in a rate hike. 

The higher interest rates are not only impacting home buyers. Homeowners are facing affordability issues with their repayments. Those that have had their mortgage term end this year or will have it end are going to be facing much higher interest rates than what they were paying previously. Those on fixed rate deals will have spent the time shielded from rate hikes. Going from the historical low interest rates offered only two years ago to rates of today which are higher than in 15 years could cause financial hardships for many households already strained by the pandemic and inflation.

Homeowners do have the ability to save money, perhaps not saving money by obtaining a lower interest rate than what they were paying on but saving money by avoiding paying more than necessary. A remortgage is a smart strategy when a mortgage term ends. Without a remortgage, a homeowner will be moved to the lender’s standard variable rate (SVR) which is usually a higher interest rate than what could be found with a remortgage. Also, with a remortgage a fixed rate is possible which would help save more money by helping the homeowner avoid further rate hikes.

The housing market is slowing down according to several reports from home builders, lenders, and real estate companies. It is not surprising due to the higher interest rates. Some experts welcome the declining demand in the market as they see a correction necessary to high house prices that were boosted upward due to high demand during the pandemic.

There is the possibility the housing market could remain resilient. There are still many cash buyers waiting in the wings to take advantage of lower asking prices, and first-time buyers determined to get onto the property ladder will seek help from family members in affording their starter home rather than walk away. If the housing market falters too fast, too much, there will likely be incentives to keep buyers attention in the market despite higher interest rates such as stamp duty discounts or buying schemes. 

The next month will offer a window into what could be expected for the rest of the year for the UK housing market and how it will impact renters, buyers, homeowners, investors, and the economy.