Are interest rates actually bringing prices down?

[Mylittleoldbabeee]

We have sold and are looking to buy. We have a £500k deposit, we are porting 6 years of a mortgage at 2% for £400k.

a dream house we love has come on for 1.2m. Before the interest rate hikes - we could have borrowed the additional £300k and it would have been very comfortable to pay back.

however now, we can really only stretch to borrowing around £200k extra at the higher interest rates, plus in 6 years when our current deal expires the whole amount will be at a higher rate so we don’t want to overstretch ourselves.

Prices are still high where we are and We are in an extremely fortunate position, and so I struggle to see how people can afford these prices?

Are we best to just keep waiting hoping prices will come down? I know no one has a crystal ball but surely prices are no longer sustainable?

What I’ve noticed recently is just that far fewer properties are coming onto the market in my area, which I suspect means that many people are looking at the cost of borrowing and then those who don’t have to move right now are opting to stay put instead, which will put something of a dampener on any clear evidence of prices falling. We would have thought about moving this year, but don’t have to do we’ll just see what happens to rates over the next year or so.

Eventually, higher rates will feed into prices, because not everyone can or will want to hold off moving in the medium to long term - but I think the anticipation that rates will begin to fall once inflation is back under control means that many people will wait to see if this is the case.

I don’t think we will see house prices come down on paper but i think the fact is people are open to taking much lower offers then what houses are being listed for.

I have found people are only selling if they need to; majority of houses we looked at were divorces, old people or landlord rentals so I do. I.E we are good buyers and buying a probate property - the person wants to sell and we are solid buyers so that fed in to their decision of a £30k reduction. We are in an area where houses usually fly - any other time previously this house would’ve gone over asking and we wouldn’t have gotten a look in, we almost didn’t see it for that reason! I would go and look at houses over your budget and put in some ‘cheeky’ offers - you never know.

Saying this think there is a sweet spot in the market - we bought when the market was in absolute chaos a couple of months ago and rates were increasing week on week. As soon as rates start stabilising - which I feel like they are? I don’t reckon people will be open to offers anymore.

Also, the only reason this worked for us as we had money for renovations which we unfortunately had to put in to the house as we couldn’t borrow what we wanted to which is super frustrating!!

I agree very little is coming on the market - partly usual summer holidays effect but a large part is people not selling unless they need to. Lots of contact from estate agents trying to find people who want to sell.

Those who do list are in two camps price wise, those who list at last year’s prices are sitting on the market a while and then either disappear (decided not to sell) or reduce price. Or a few who list at a lower price and sell quite fast.

I would offer on that, they can say yes or no but if it's your dream house you have nothing to lose and you are in a good position that may appeal to sellers?

It's going to take time for the prices to adjust to the normalisation of borrowing costs. I'd advise stand back and wait 12 months and then look at again - assuming you can continue to add to your deposit, you will likley get more for less, but a bit of patience is needed. I don't see how prices could hold up personally. How much they will fall is finger in the air stuff. My guess is about 20% nominal decline from peak by end of 2024 to mid 2025...

Yes, if I’ve read the OP right she thinks she can afford to offer up to £1.1m (being slightly more cautious due to rising interest rates).

OP, if I’ve understood your position correctly then I would definitely offer, that’s less than a 10% reduction on the asking price.

Locally prices have dropped and things are sticking on the market. I bought recently and waited a few months and put a low offer in.

Yes prices are coming down but slowly and it varies depending on area, price and type of property. Some people will be prepared to take lower offers.
The number of homes on the market is up significantly compared to last Summer but that will vary too.

I'd go and offer 1.05M, and looking at going to 1.1M if you think its worth it after a vewing.

Check out the weekly UK Property Stats Show on YT.

The number of listings coming on each week are pretty much identical to the years before Covid. But fewer homes are making it to exchange/completion and so the available stock is backing up / building up.

From the Best Agent data we can see that the median price of properties marked as SSTC is around £280K whereas the median for unsold properties is £340K. Cheaper, more affordable homes, are selling ok. Stuff above £500K+ less so. That's where the biggest percentage drops and absolute value drops will be seen (OP you're in this bracket).

The data is quite variable by area (see the stats show for details) so generally the North is ticking over quite nicely but the South is getting a kicking.

Interest rates may come down a little but I predict that they are never going back sub-3% and are likely to settle at the normal rate of around 5% or 6%.

I believe interest rates will hit a peak of 5.75% this year (possibly slightly higher but no higher than 6%) then will start to slowly fall to about 4% by the end of 2024/early 2025.
On a house valued at 1.2M it’s definitely ok to offer 1.1M if that’s the question. I think that would be a good offer and the Vendors may accept it unless you are buying in a particularly desirable area. Could even consider going in lower at first like 1.075M. Have a look on Rightmove at what compare properties sold for in your area. Though their data is always a few months out of date, prices haven’t changed much in the last 6 months.

Thanks for the advice.

I can’t understand why the owners are moving, they’ve only recently spent a lot of money on the property. So I think they are in the need to sell camp rather than would like to, so they might consider an offer.

I just don’t want to look, fall in love with it and then not be in with a chance!

Definitely seeing this around here too!

Of course you're in with a chance if you can stretch to 1.1M or thereabouts.

You're also within your rights to make an offer after viewing it that doesn't quite meet what they were hoping for. When I viewed my current house I didn't think we could afford it but the secretary in the EA I was chatting to told me to view it anyway! They accepted an offer of over 100K less than the asking price.

I’ve got a ton of property alerts on zoopla and the emails about properties having their prices reduced are definitely getting more frequent! Sure it’s area dependent though.

Our max is £1.1 possibly £1.125 (if we can get a slightly better rate now on the mortgage).

do we just offer that? And say look we can move quick, and this is our best offer? Can’t see them accepting and so don’t think there is any point in starting lower?

No one can predict their reaction. But if I had a house on at 1.2M in todays market and got an offer for 1.1M from people who can move quickly I would be happy with that. If anything I would be tempted to go in at slightly under that and allow the EA to talk you up to 1.1M

PropertyLog is the best way to see all the price reductions I think.