House prices and recession

[Mumof22020]

Whats everyones thoughts on house prices are they likely to come down in price if theres a recession? The prices are crazy at the moment and with the cost of living going through the roof we're surely going to hit a recession.

I'm in a popular area of Yorkshire and houses here are still selling in days. Can see that most are going to best and final offers as estate agents are adding this to the listing. Seems to be very little on the market at the moment, and lots of competition for anything that comes on.

If our interest rate goes up tomorrow, will that have an immediate impact on the mortgages rates available? I’m hoping to apply for a mortgage but probably won’t complete the application before next week 😬

Can't see prices dropping; maybe they'll level off a bit but a crash seems highly unlikely. Peoples working patterns have Changed too so Houses in attractive areas will continue to rise I suspect. Rural and particularly coastal areas have seen a boom; with work from home/ hybrid working patterns

If our interest rate goes up tomorrow, will that have an immediate impact on the mortgages rates available? I’m hoping to apply for a mortgage but probably won’t complete the application before next week 😬

Yes, the banks will most likely change the rates tomorrow to reflect the increase……

@Overtheseas "If our interest rate goes up tomorrow, will that have an immediate impact on the mortgages rates available?"

Yes. I would apply today before the mortgage product at the current rate gets pulled.

@65honeybee "Can't see prices dropping..."

Well, either you are correct; or the BoE, whose economists modelled that a 1% increase in rates would reduce house prices by 20%, back in 2019, is correct.

Who would most people bet on?

The world is absolutely unrecognisable from 2019 I doubt very much those economicist Would stand by those predictions now

@Nothappyatwork You are right. People have only gone and taken up even more mortgage debt since 2019 (Stamp duty holiday, buying bigger houses away from the main cities, mortgage payments going up due to people taking mortgage holidays, people working in tourism and hospitality having even worse job security and entire industries struggling, and inflation driving up energy, fuel and food prices). So if anything, they would revise those numbers upwards.

I would love a 20% drop on a personal level- our mortgage is paid off, our house is still worth considerably more than we paid for it in 1998 and a drop would make it easier for my grown up children to get on the housing ladder!

It would be pretty disastrous for the U.K. economy though. Now.... I wonder if it'll happen...

@65honeybee - it won’t happen while there is breath in Rishi‘s body.

@65honeybee - it won’t happen while there is breath in Rishi‘s body.

I’m not so sure. Many buyers have really over stretched themselves in recent years with mortgage borrowing amounts. It all depends on how high mortgage rates end up going up to. And then we shan’t see the full consequence until people start coming off their fixed rates and start to try to remortgage…..
If enough houses start being repossessed and/or people start selling them at the same time it’ll change to a buyers market and prices will start dropping. To what extent they’ll fall is anyones guess.

It's still firmly a seller's market at the moment... sadly (for my children and their generation) I think it'll be a good few years until things change

@Nothappyatwork Solid economic analysis. You should write for the FT.

@65honeybee I wouldn’t worry too much for your children yet. It all balances out eventually.

Many buyers have really over stretched themselves in recent years

I'm not sure that this is true. The 2008 crash happened because of irresponsible lending. Since then, lending criteria have been tightened significantly in order to prevent a repeat of the 2008 crash. Banks simply do not allow people to 'over stretch' themselves these days. I remember when I took my mortgage out, the mortgage advisor told me what my payments would be if interest rates reached 10%. It wouldn't be fun, but I would still be able to pay the mortgage.

The last thing that banks want is to repossess houses, as they lose in a falling market.

@65honeybee

I would love a 20% drop on a personal level- our mortgage is paid off, our house is still worth considerably more than we paid for it in 1998 and a drop would make it easier for my grown up children to get on the housing ladder!

It would be pretty disastrous for the U.K. economy though. Now.... I wonder if it'll happen...

Unless your children have a massive deposit and /or don't need a mortgage, a drop in house prices won't help them get on the ladder. What they aren't spending on the house, they will be paying to the bank in interest instead.

House prices only fall when people can't afford to buy. Everybody loses except cash buyers, who are usually investors.

Waiting for a price drop to get on the ladder is a fools game.

I doubt they will fall. There is a shortage of homes which is different to previous times.

It’s going to take much more than a measly interest rate rise to drop house prices. Credit has to become far more expansive coupled with more supply than demand. In a recession, FTBs and lower income households lose out the most. They simply don’t have the cash to buy homes in that market. Recessions and house price crashes favour the rich. Banks tighten lending massively and unless you are cash rich, you can’t make use of falling house prices

Recession leads to job loss, which in turn leads to repossession and negative equity. Horrible cycle.
There will be bargains for some. Lots of pain for many more.

[quote Henlie]**@65honeybee - it won’t happen while there is breath in Rishi‘s body.

I’m not so sure. Many buyers have really over stretched themselves in recent years with mortgage borrowing amounts. It all depends on how high mortgage rates end up going up to. And then we shan’t see the full consequence until people start coming off their fixed rates and start to try to remortgage…..
If enough houses start being repossessed and/or people start selling them at the same time it’ll change to a buyers market and prices will start dropping. To what extent they’ll fall is anyones guess.[/quote]
I certainly havent overstretched. I could have borrowed another £100,000. Most people are sensible in my experience

[quote ledbydonkeys]@Nothappyatwork Solid economic analysis. You should write for the FT.

@65honeybee I wouldn’t worry too much for your children yet. It all balances out eventually.[/quote]
@ledbydonkeys it hasnt balanced out since 1999 🤣
How long do you suggest waiting ?

@ChoiceMummy

Recession leads to job loss, which in turn leads to repossession and negative equity. Horrible cycle. There will be bargains for some. Lots of pain for many more.

Yes, this.

Rising costs in services, fuel and utilities, wages not keeping pace with rising costs and rising interest rates.

Going back, sadly, there was a strong market in repossessions at sometimes bargain prices as lenders tried to recoup costs ( and if need be leaving owners in negative equity)

@Fretfulmum "It’s going to take much more than a measly interest rate rise to drop house prices. Credit has to become far more expansive coupled with more supply than demand"

www.telegraph.co.uk/property/uk/spooked-lenders-pull-long-term-mortgage-deals/ - this was as of this morning; if the BoE rates reach 1%, credit will become much more expensive and harder to get.

I've seen forecasts of 1.5% by end of yr but who knows.

Just seen they’re now predicting the base rate will be 2% by the end of the year…

So silly question i dont understsnd all the interest rate stuff. We bought are house 5 years ago and had a financial advisor arrange it all, the 5 year fixed rate is coming to an end in a few months so I have to arrange a new one so how much extra interest will I have to pay?

@Mumof22020

So silly question i dont understsnd all the interest rate stuff. We bought are house 5 years ago and had a financial advisor arrange it all, the 5 year fixed rate is coming to an end in a few months so I have to arrange a new one so how much extra interest will I have to pay?

It very much depends on what deals are available at the time like for example mine is fixed but when the fixed rate comes to an end I will have to pay I think it’s 5% over whatever the base rate is which is horrendous in theory but what you’d actually do is just shopper and get a better deal and remortgage with somebody else.