To say house prices have to fall?

[Mushroo]

We’re planning on moving house in the next couple of years and in London so prices are mad.

we were looking at borrowing £550k which previously was about £2500 pcm. This was affordable for us and gave us a budget of c.£700k.

just had a look and the monthly repayment under the new rates is about £3600 - completely unaffordable so our new budget for a house would be £550k - £600k to make it affordable.

I know were in a very fortunate position but it will be the same across the board. A £200k mortgage was about £800pcm and it’s now £1,239pcm, so the people who were buying a £200k house now have a budget of £150k.

will we finally see a drop in prices?

At these new rates, people who can will start seeing their mortgages as an actual debt and overpaying it. For years people have paid the minimum because it’s such cheap borrowing it was better to save and invest. I’ve already heard friends saying they have shifted from saving to overpaying the mortgage by all that they can each month. Of course many people can’t do that but DH and I currently see how point in saving anything while we are facing our £200k mortgage jumping from 1.9% to 6%+ next year.

These interest rises will change the whole property market but as much in terms of how people view mortgages, risk and debt, as actual selling prices directly.

Any government intervention will be to increase the housing stock. That means removing planning consent for green belt, removing building regs and giving tax breaks to large house builders eg wimpey and persimmons . There will be nothing except a stamp duty freeze for peasants.

It was looking possible that we might be able to become FTB in the next couple of years. It certainly isn't now. We have a secure tenancy with no prospect of the rent going up but I feel genuinely afraid for the next few years - mortgages barely being offered, deposits getting ever higher, plus bidding wars for rental properties when rents have been rising above inflation for years as it is.

Read yesterday that the average house price rose by £36,000 last month.

They have to drop if people want to sell them. Because the people that want to buy them have less purchasing power. See OPs post. It's not rocket science.

However if the people who have them are able to keep them without selling them then we could see a period of stagnation rather than a drop.

Places that have seen massive rises, maybe.
But a blanket drop isn't necessary. Different parts of the country have different prices, and round me, houses haven't risen dramatically in value.

House prices have sky rocketed (well in our area) we are already starting to see them become a little bit more realistic, still overpriced, but not horrendously as the last 12 months. So i think the "drop" we will see is actually just the market evening back out again.(in my humble opinion 🤔)

I would love it to just slowly decrease. If we could sell our current house for what we paid for it (in 2019 so pre covid madness) or 10% or so less, that would be fine assuming the house I’m buying has also decreased by a similar amount.

I do worry though for people who bought it 2020 / 2021.

My friend did - she is a teacher and bought on her own. Her mortgage is forecast to go from £700pcm to £1235pcm. She’s not sure what to do! She certainly wouldn’t be able to just swallow the increase.

Are you also selling? Because if prices drop you will also sell for less presumably?

Oh, sorry just saw that you will hope to sell for about 10% less.

No, you can't just switch to interest-only. You can borrow a max of 75% loan-to-value on those. A lot of people have also borrowed up to their 70th birthday and would need to switch lender/pay ERCs to extend the term.

I am also expecting approx 10% but it'll take a while. The people selling here are stubbornly refusing to reduce.

I don't understand how prices can fall when the demand for housing is so high. Even if demand eases off, it will still be high. My PIL died and we could have sold their property five times over, very easily.

Hey @Mushroo nothing useful to add except commiseration, we are in the same boat. The dream house has appeared and now suddenly we are 150k short because we just can't do such mad repayments. Literally just phoned them to say I'm sorry we just cannot afford it, despite having seen it off market etc. Best opportunity in 6 months.

No idea what the solution is. Not convinced enough of my own analysis to proffer it.

Even if there is a crash it doesn't help us unless the price difference between properties reduces, as we are upsizing. What I do know is that at current rates it's not worth moving because another 150k (on top of our house value) doesn't give you a material increase in house (ie, not worth moving for). We need to be able to borrow 250 to 300k additional to current mortgage, in order to buy something worth moving for. Which we can't afford at current rates. So looks like we aren't moving either.

I don’t think (yet) people understand the numbers. Going IO at 8% is a very different ball-game to repayment at 1.3%.

stuff in the top bracket isn’t shifting where I am - and even the “pocket change” stuff is coming back on the market. Something’s changed.

@MamaSharkington its crap isn’t it! I think the only answer is to wait and hope prices come down but it’s so frustrating having done everything ‘right’.

Haha if the government really cared about homelessness and the threat of it they would have removed the housing benefit cap.

They would work with lenders and the rental market to make it illegal to refuse those who need a top up for their rent.

There are hoards of people living on the street, temporary accommodation and sofa surfing as it is. It rose 16% in 21/22
www.bigissue.com/news/housing/how-many-people-are-homeless-in-the-uk-and-what-can-you-do-about-it/

if the government cared about the poor food bank usage wouldn’t have increased before the current financial situation. If they cared people wouldn’t be taking their own life’s due to poverty.

My next door neighbours house has gone on the market at an obscene price today. It's a probate sale so the kids are being greedy. I look forward to watching them reduce multiple times over the coming months.

If you’re lucky you’ll get to see it brought down in tiny increments over the course of years - AND get to loiter by the curtains with a coffee when the siblings do a drive-by every 3 months to yell at each other. 🥃

It's a good thing if they stop rising - ever increasing prices benefit very few & are economy is pretty fucked because the only growth we've had is in housing.

@Hooverphobe I can't wait

Alternately @Dsisproblem perhaps you’ll be watching slack jawed through your twitchy curtains as the viewers stream in and it sells in days. You just never know. That’s happened round where I am, when I was astounded at asking prices - poof, sold two minutes later. Arguably it’s not greedy to try for the highest price possible if you’re not in a rush to sell. I’d rather do that and then reduce rather than start lower, sell instantly and wonder if I could have got more.

Normally upsizing is easier in a falling market.

I've just bought a house that was listed a year ago after probate, we've bought it for half the original guide price after they kept having to reduce.

EA said the grandkids that inherited were just utterly greedy.

You shouldn't base the entire market off a single anecdotal experience.

If you could have sold it 5x over easily then you priced it too cheaply, just as someone who cannot sell priced too expensive.

There can be huge amounts of demand, but ultimately it's the amount of cash that people can get hold off that determines the price. See earlier comments. People cannot raise the mortgages, even if they do want the places.

We are very close to moving but I still have all my Rightmove / Zoopla alerts set up.
We put our house on the market in June, got full asking.
looking at the houses going on now, in our immediate are I would say prices are stable, if not still rising slightly. Houses that stick around are ones that have an unusual layout / need a lot of work. Anything else still goes quickly.
Same in the area we are moving to (Thirsk, Selby, York) area. Things coming on the market now for the same price that we are paying for our new house are not on the same level.
Prices are still rising in that area.