I am beginning to think house prices are going to dip.

[Overdon]

I found out this week that banks are pulling their cheapest mortgages (source: Sky business news) due to banks ‘forecasting’ the market.
With interest rates expected to rise due to inflation and the increased energy costs households are facing, I wonder if this could sap confidence in the market.
I am also seeing an increasing number of homes coming back on the market that were previously SSTC.
There is of course still the supply/ demand dynamic, so I don’t think they would crash, but I think the heat is coming out of the market.
Interested to hear your thoughts.

Prices are similar to the highs of 2015. If interest rates rise which rumours predict they will. It means people won't be able to splash as much meaning less buyers and so prices will also fall. I suspect supply will also fall though, as vendors will feel they aren't going to get want they want.

We're just about to buy/sell for the fifth time in 16 years.

Started out buying a flat, upsized to a bigger house, upsized to another bigger house, downsized to a smaller house, now a flat downsize.

The market has influenced our moves each time. We have upsized during market dips and downsized when prices were high.

Flats have never been less popular since cladding and covid, and it has allowed us to buy a four bed flat in an amazing area for cash.

Being mortgage free is everything we wanted in a home. The downside is this will be the third time we've moved into a shit hole

It is definitely uncertain now. The Tories would like the house prices to go up foreever and keep throwing more gas on fire (like their stamp duty holiday) just to keep their voter base happy and ignoring the fact that younger generations will remain priced out completely unless helped by bank of mum and dad.

However, their hands may be tied by market forces aka inflation, which has proven to far more persistent as opposed to the previous official BOE line that it is 'transitory'. Mortgage rates are already up in the US with 30 year fixed> 3.5%. While this is still low, refinance applications are expected to decline 60-70% next year due to this.

In the UK banks will start coming under pressure to start raising rates marginally due to swap rates going up (source: U.K. Banks Under Pressure to Start Raising Mortgage Prices - www.bloomberg.com/news/articles/2021-10-22/u-k-rate-surge-pressures-banks-to-start-raising-mortgage-prices)

Overall, this is still a marginal rise but could stall the overall sentiment. Prices rose this year (in excess of stamp duty savings) due to FOMO. When one thinks that prices tomorrow will be higher than today, there is a mad rush to buy anything (even dross, which now seems to be sticking around much longer on Rightmove). When people expect prices may stall or reduce tomorrow, that changes the demand momentum quickly. End of the day prices are not inherently determined by demand / supply but actually by future expectations and availability of cheap credit.

I think overall it is still early days but a persistent inflation will force BoE hand to no longer be able to atificiually propr up the property market.

I have to say that the thing which worries me the most is interest rate rises.

Some people have been forced to buy at the very top end of their budget and after their two year fixed rate ends, will very likely struggle.

It's awful really.

I've been a homeowner since 2002, yes prices dipped in 2008, but not a lot in my area. (people just sat it out and there were less houses for sale)
My brother held out buying for over a decade waiting for a crash. eventually he bought about 2010. I know he spent more in rent, money that could have paid down a mortgage.

In my lifetime there's only been two market corrections and houses are now worth at least worth four times what they were when I was a teen.

I don't think there will ever be a dramatic price crash, people just ride out the storm.

I have to say that the thing which worries me the most is interest rate rises.

I am a bit concerned about this so we are not going to stretch ourselves & will fix for 5 yrs most likely.

Nope still a very hot market here in NW.

Not sure what it will take
But currently cant afford to move house so staying put.

Not dip , but the price inflation will slow. Not the same as house price dip. Why would they dip, there is no extra supply and the demand is still there, if a little less than last 12 months.

Market has cooled in Oxfordshire a bit. Prices still high but family homes that people couldn’t even manage to view before going under offer are sticking around for sale longer now…

I'm buying a house now that needs updating (think pine panelled walls) but has been well cared for. It's a 2000sq foot 5/6 bed and we got it for the price of a well presented 3 bed, so I'm hoping in 10 years we can add enough value to ride out whatever happens to the market inbetween!

I'm veering daily between 'wtf have we done' to 'best decision we will ever make'

It’s still insane round me. Houses being sold hugely over the asking price within days of coming on the market.

Vendors being offered undisclosed sums to take their house off. Happened 3 times near me ( that l know of)

@Summersdreaming
I did exactly that in 2007, thankfully I sold a flat at the hight of the market and bought a wreck. I rode out the dip whilst renovating, on the lowest interest rates. Overpaid for years and am now mortgage free.

The flat I sold, resold this year for 5 K less than I sold it for. Some properties fair much better in a storm. The terraces in that area didn't fall so much, and are now more than they were in 2007.

I've noticed that London money isn't going so far outside of London. We are debating exactly where to move too but if we don't leave London now I'm worried it will get too expensive in the future?

Well there are certainly some economy savvy posters on here, lots of food for thought.

I agree with a PP who mentioned that some regions in the north took many years to recover to pre crash 2008 prices. I think if we do see a dip, it would be these regions which would be likely dip first/hardest.

We bought our home recent (FTB). Lucky enough to buy a house we can, and do, intend to be in long term. For us we may have bought at the wrong time as the market could crash but we are doing this as a long term place to live and not have to continue to rent. So for me a crash doesn’t impact me too much. I also ensured that we are comfortable in our affordability so an inflation rise shouldn’t affect us too greatly.

However I do feel for friends of a similar age who need a dip in the market to make buying a more affordable prospect. That and tighter rent controls on all landlords would be beneficial to both markets.

@sst1234

Not dip , but the price inflation will slow. Not the same as house price dip. Why would they dip, there is no extra supply and the demand is still there, if a little less than last 12 months.

Credit availability is driving the price, not supply and demand. One can only offer what the bank is willing to lend, which is a direct function of how much interest payment can the borrower afford.

Supply is mostly constant, while demand is practically unlimited. If access to money was uncapped, young adults would move out earlier, family would get bigger dwellings, couple that don’t get along anymore would separate, and many household would buy a second home for holiday or as a pied à terre for work, etc. The only factor here is how much money can one borrow.

[quote gladis665]@Summersdreaming
I did exactly that in 2007, thankfully I sold a flat at the hight of the market and bought a wreck. I rode out the dip whilst renovating, on the lowest interest rates. Overpaid for years and am now mortgage free.

The flat I sold, resold this year for 5 K less than I sold it for. Some properties fair much better in a storm. The terraces in that area didn't fall so much, and are now more than they were in 2007.[/quote]
I'm hoping we'll get away with it because of how much work it needs. Some of the pristine but 70k overpriced semis that are selling at the moment will take a long time to get back to the current price as they can't be improved further.. time will tell!

Only time will tell.

Unfortunately I’m with Gladis665. They never really crash
House bought in 1988 for 39k now worth over £400k
House bought in 1996 got 45k now worth £250k
House bought in 2003 for 189k now worth between 5-6 k
House bought in 2013 for 250k now worth about 420k

Can’t see much evidence of price crashes there.

@Wardrobes123 I think you were wise to ensure you bought a house you could comfortably afford.

The market has been so crazy and people going FOMO, may have lead to people mortgaging to the hilt which is dangerous territory.

@ArseInTheCoOpWindow

Unfortunately I’m with Gladis665. They never really crash House bought in 1988 for 39k now worth over £400k House bought in 1996 got 45k now worth £250k House bought in 2003 for 189k now worth between 5-6 k House bought in 2013 for 250k now worth about 420k

Can’t see much evidence of price crashes there.

That's because we're at a market high at present. You could take different start-finish dates and get very different results. In one of the bigger dips, houses in some areas fell 20% or more in a year. You can prove whatever you like if you cherry-pick the stats. Long term, and given high rents, buying is almost always a good idea. But in the short/medium term, it is possible to get badly stung if you have to move/sell at a bad time. Hence negative equity.

It’s almost always better to buy what you can afford than wait for the market to dip to afford what you wanted a year or two ago. Trying to second guess that market is a fool’s game. Getting on the ladder or getting up the ladder will always work out better in the long run. Very similar to the stock market. Think long term.

In my area, lots of buyers are around mid 30's...middle class professionals, usually a few children....work as accountants, architects etc....all changed in past 10 years here...but they do seem to all have cash sloshing around for expensive improvements...montessori nurseries, artisan bread and coffee etc etc...these people have bought at top of market...700k plus and then spent a further 2 to 300k on a full refurb...loft plus extensions...so there is money about !

Haha @earsup you are almost describing my circumstances! I do one of the jobs you mentioned, and am buying for a similar price. It's top of my budget because of the size of my deposit (lower than it should be due to a relationship breakdown), but as a high earner, multiples of my salary make it within reach.

Interest rates would need to rise by more than 6% before it would become more of a challenge for me to afford, and even then there are other expenses I would cut before downsizing. The amount I can save monthly mean that in 2-3 years time, I'm planning a 2 storey side plus wraparound extension, and intend to stay in the property for at least 20 years.

The difficulty will come for those who aren't in a similar situation, and I'm realise I'm very fortunate. My DC are young, however their generation will struggle to afford homes given the pace prices have moved, so I'm also saving so I can give them at least £100k each at 25 for a deposit.

The advice I would give anyone is to buy whatever you can reasonably afford, factor in a 3% interest rate rise if you intend to be there more than 5 years and carry on. Anyone putting their life on hold in the anticipation of a crash would likely find the market outpaces them in time.

South east here, market still going up.

Offers accepted on sale and purchase at the beginning of August.

Since then similar houses, not even as big as ours, are going up for 50-80k more.

Thank goodness we exchanged last week, the fear that our seller would want more/pull out to re-list to get more was real.