Will these price falls continue ?

[DrySherry]

So last year (late 2024) I was partly instrumental in the decision made by some younger family members to hold off buying a first property. They were worried about overpaying for a small first house and regretting it, becoming stuck, if values started to come down. With only a small deposit they could quickly be in negative equity, complicating the reality that both want to keep the financial flexibility to move house if better job openings appear in a different area.
I too thought that it was more likley than in has been at any point for the last couple of decades that prices will come back down in line with affordability. They didnt have a great deposit - so my advice was that they should focus on increasing that for a year or two. Giving them the option of more favourable lending rates when ready, and hopefully more house for the money if prices soften. We have since seen some falls in some areas but not as much as hoped for. They have over the last year done really well on saving and now have a good 10% plus deposit - instead of struggling to reach 5%. They are fortunate that they had, and still have, the option to stay put and continue to build a bigger starting fund and that's what they decided to do. Fortunately they rent from another family member and get a very reasonable deal.
After reading this latest rightmove report I have become hopeful for them that they may have made the right choice. I'm interested to hear what others expect to happen in the housing market in 2026 ? Do you think falls like this might continue or will values just dip a little again or flat line this year ?

https://uk.finance.yahoo.com/news/average-house-price-6-695-000100433.html

It's not as simple as potential fall in prices.You need to consider, the amount being paid in rent compared with mortgage interest, the availability of property in the price range you can afford and location. Housing, like investing in stocks and shares is a long game, yes there have occasionally been market falls, but they always even out in the end.

Oh great, so glad I've been putting off a new roof in the hope that it settles down 😞

The question is, are you getting wet or not? If the roof is causing damage to the property it needs doing immediately.
If it’s not and you can hold out, hold out

This is the point I’m trying to make (badly it seems). The chances that prices will drop so significantly to make things suddenly much more affordable feels unrealistic.

Since 2016 the supposed height of the market, house prices have doubled in the area I live. I wish we’d sold earlier but we sort of faffed around a bit and then only sold earlier this year. We’ve borrowed a huge amount to buy the house we are now in but it’s a long term house so prices changing won’t affect us - other than when we come to remortgage obviously.

No we're watertight for now thanks. My partner gets up there and sticks bits back on as they come loose 😀. Apparently that product literally called "Sticks like Shi#" is doing the job.

All the factors that increased prices to what they are now, are still in play except inflation has come down a bit. Materials are expensive and labour costs have gone up because there are fewer people doing the work. As another poster said, if the roof is urgent - get it fixed as soon as you can.

Interest rates will fall over the next year, and mortgage rates tend to follow, with banks competing for business too. When mortgage rates go down, prices go up.

Either way, I think property will always be popular for investment as it's pretty much inflation-proof, whereas money in a bank loses value over time due to inflation.

Don't make the mistake we made: spent years dilly-dallying, uncertain and unfocused, waiting for the right moment. That moment never came! We thought Covid would be the perfect opportunity, and look what happened there...

Yes, plus I work in construction and due to minimum wage increases we have had to increase our skilled workers to compensate, our prices will only go up unfortunately.

Base rate is predicted to fall to 3.25 by end of 2026.

According to a builder acquaintance, developers are slowing down their developments, not building on land already acquired and laying off workers.

Reeves is encouraging the banks to be much more creative with lending. If, as she hopes, it’s going to be easier to borrow more money, more easily, house prices will go up.

https://bmmagazine.co.uk/in-business/mortgage-rules-eased-first-time-buyers-self-employed-older-borrowers/

Mortgage rules to be eased to help first-time buyers, self-employed and older borrowers

The FCA said it plans to simplify mortgage regulations and loosen restrictions on lenders to allow more flexible products, better suited to people with irregular incomes, later-life borrowing needs and non-traditional career paths. The changes are intended to support what the regulator described as “under-served consumers” and widen access to affordable home ownership.
Among the proposals, the FCA said it is reviewing rules around interest-only mortgages, with a view to making them more accessible for older borrowers, and will launch a focused market study into the lifetime mortgage sector to ensure it meets the needs of future customers…..

From reading OP’s initial post, the young pair have managed to save a further 5% deposit in the space of little over 12 months. They have a secure, low rental property to live in at the moment and are likely to be able to remain there for several more years should they wish to (presumably still able to save about 5%/year)?

Step back and look at their situation in the next 5 years:
Are they on starter jobs with good career prospects?
Are they likely to have to relocate if one loses their job (so big buying/selling costs in a short period if time)?
Are they hoping to start a family any time soon (so they will have a reduced maternity income and then nursery fees)?
Are either of them likely to come into an inheritance?

Life is a lot less stressful with a smaller mortgage and a good rainy-day fund, BUT it might make sense for them to research their “dream streets” and keep an eye on prices.

The economy is unlikely to grow much, if at all, with the current government holding the purse strings. Interest cuts are being anticipated by the market as the economy flatlines. Couple that with a loosening of mortgage lending restrictions 26/7 MIGHT be a good year to get a mortgage.

If neither if them have LISAs I would encourage them to research whether they would be suitable investment products (max house price might be too low?).

Crikey, if they are going to allow interest only again for residential hopefully this time they will insist on a separate investment plan to pay the mortgage at the end of the term ? Seems like a desperate plan to allow more debt to create more growth. What a mess, but very relevant to this thread. Thank you for the heads up. Had no idea that might be coming.

encouraging the banks to be much more creative with lending
Isn't that what caused the 2008 crash 😱

market study into the lifetime mortgage sector to ensure it meets the needs of future customers
So the customer never owns the house, only ever rents it from the bank, and that's being sold as something which meets the needs of the customer rather than allows profiteering from the bank!

Same old old.

Rather than let house prices fall to affordable levels, loosen up lending so people can borrow more money to afford them. Lining the pockets of the banks in the process.

It works every time and the public fall for it hook line and sinker, getting completely screwed over by the banks and the government because they must have a house NOW.

Meanwhile it's the government 20 years down the line that has to face the sad faces in the Daily Rage saying "we never realised we had to pay the capital off when the mortgage finished".

I suppose if people are too stupid to see this for what it is then ultimately they get what they deserve.

I was amazed to find out a friend is on an interest only mortgage. I had assumed they were no longer a thing.

Same. I’ll be continuing that particular method until the bloody roof blows off like the Wizard of Oz 🤣

To be fair if I’ve had an interest only Mortgage on the property that I bought back in the day. I could put the remainder of the mortgage on my credit cards now that’s how low the capital was and the monthly interest payment was £110 a month so you would expect that I would’ve ploughed the rest of it into my pension and in six years time I could clear it in total

In short, op?
No.

@GasPanic I don't disagree with you about people's stupidity.
BUT ... some people just can't get their head around maths, don't understand compound interest etc.

How hard is it ?

With this loan you pay us £x per month in order to have the loan. In 20 years time you will have to pay us £y for repayment of the capital.

I mean it may take a few brain cells to work out the total cost vs say a traditional mortgage or buying cash.

But to understand the consequences is not rocket science.

In 20 years time you are going to have to pony up a (very) large sum of money. So what is your plan to be able to do that ?

I would suggest that buying now with a small deposit, unless one has got the property for a bargain price is a gamble.
I really don’t think the economics of the country are in a very good place and that is without any Black Swan event that might be incoming.

It is a gamble but so is leaving it and watching prices go up quicker than your deposit can be saved.

That’s not going to happen in a falling market which is the territory we are in now.