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

"Inflated away" to me seems somewhat optimistic.

£100K in 2025 was worth £56K in 2005.

A substantial reduction, but hardly chump change for most people, when AI suggests the average savings for people in the 50-60 year old range are somewhere in the region of £13K-£28K.

Agreed
But it would be unlikely that they would only have those savings if they were only paying the interest part of the mortgage. I pay a capital repayment mortgage these days and £500 a month of that goes towards the capital.
If I had an interest only Mortgage I would be paying £400 a month and I would be investing the other £500 in a stocks and shares ice cream and chances are. I would be making substantially more than 4% that I pay on the on the mortgage.

But again you make my point for me if 100 K is now 56 inflation is doing its job 🤦‍♀️

More fool than them by the sounds of it

Again, somebody with a basic grasp of economics is in a better position to be advising anybody outside of the regulated services then somebody who doesn’t understand capital versus interest
You can take that as criticism

I think it will be a lot worse than what you describe. I guess we will need to wait 5 or 10 years to see if I am 'doomerist' or not.

Thanks @kittywittyandpretty. Hopefully, no one reading will jump into an interest only mortgage on the basis of your great 'grasp of economics'.

The budget has finally gone and none of the draconian measures happened so people waiting to decide to buy may do so in the spring or at least after Christmas. The base rate may be cut tomorrow predictions say, if so housing will take a boost as mortgage rates should fall. I think house prices will go up next year.

You probably wouldn't have an interest only mortgage forever, maybe initially if it was hard to afford capital payments, then switch as your career progresses. Or switch when you sell the first house and trade up.

Unless inflation disappears it is true that the initial cost of the house is less in real terms as time goes by, maybe 20% less in 10 years and similarly inflation increases the current value of the house. An interest only mortgage could be a disaster, if you need to sell and prices crashed just after you bought (even with a standard mortgage you could be in trouble), but if you are staying put you can ride it out and you still have the house to live in rather than paying rent.

Not really. The issue is governments not keeping a good stock of social housing. There will always be people who whatever they do they will never sustain a mortgage, and it's those people for whom governments have decided the private rental sector should pick up. Unfortunately they have now destroyed the prs without making any alternative arrangements for housing those people, which is why there is a homelessness crisis again.

I would say though that they are in an enviable position just as they are with cheap rent from a family member allowing them to save quite a bit.
I do wish the government would stop with their interference with the market.
What they have done over the last few decades has made things worse not better, unless you are talking about the builders who it has definitely made things better for.

Yes I understand the concept but you still make a lot of assumptions about real wages rising in excess of CPI/RPI inflation and riding out crashes. As you say, a fall in house prices is certainly relevant too.

I'm not sure what you mean by 'not really'. What you mention is clearly an issue and has been so for 40 years, getting steadily worse. It's definitely not the only reason for the social crisis, which is present in lots of other countries too.

Exactly. Two things we can pretty much guarantee is that the government, BOE and other central banks will step in very, very strongly once things start going wrong and that they will only mess things up further.

A lot will depend on what happens in Japan, their interest rate decision is tomorrow. Japan heavily influences credit/bond markets while the UK/BOE is basically at the mercy of credit/bond markets, volatility is building, not a good time to go large on the mortgage debt.

https://www.firstpost.com/world/bank-of-japan-set-to-raise-interest-rates-to-30-year-high-amid-bond-market-jitters-ws-e-13960129.html

If the Japan bond market causes U.S yields to rise UK will follow, the crucial measure is the "Ten Year Yield" that is the guide to how much your mortgage debt will cost.

I do one day a week in estate agents...cheap flats are selling quite fast but they are cheapish...houses not really shifting and very little for sale. east london.

And as predicted BoE interest rate drop. It will be interesting to see the effect on mortgage rates and house sales.

Swaps rates edging higher after the cut as BoE foresees little easing ahead. 4% is the new 2% for mortgages, house prices have yet fully adjusted to this new paradigm due to high rents but the latter are now dropping as well amid negative migration. I am a home owner not a doomer but the outlook is clearly grim. November alone saw the worse drop in London property over the last two years, as per ONS.

Sounds about right.

https://londondaily.com/london-new-build-home-sales-plunge-to-lowest-since-financial-crisis

Well past that point now I think.

https://www.bloomberg.com/news/articles/2025-10-13/london-homebuilding-on-track-to-fall-to-quarter-of-normal-levels

We have owned our house since 1997. We paid the going rate in a static market, and we've been here almost 30 years, and now the mortgage is paid off. It was the house for the family we went on to have, but while it is still a delightful house with a fabulous outlook, it is no longer where we want to live. We shan't need as much space in the future, but as DH is 6'5" we also will not be interested in cramped cottages with limited headroom. Ideally we would also like to have a nice view, although a different one.

We are thinking of selling next year, to relocate to a completely different area, that we think will be more fun for us in our 70s. Closer to friends and family, better rail/air links, in a naice town. Reality tells me that we shall not release much money by moving. Plus the stamp duty -- and any refurb is going to cost more than it did 10 years ago, and by moving 200 miles away I shall have completely lost a 30 year database of trusted contractors.

Any opinions? I/We don't want to stay where we are, but sometimes the big picture is a bit big?

Left behind areas like Redcar, Hartlepool, Sheffield, etc, etc.

I don't know anything about Redcar and Hartlepool, but Sheffield is one of the fastest markets in the UK right now. A friend's daughter is moving there and has had to move very swiftly to have an offer accepted on a 2-up 2-down terraced house in the area she wants.

Looks like sales are dropping fast though, financial crisis levels?

https://www.plumplot.co.uk/Sheffield-property-transactions.html

Hands up. (Almost) Guilty as charged (until I saw plumplot stats). I looked at the first page of houseprices.io and saw a bit of red. But it was more than on the following pages.

I saw this case on the first page, where a house cost less than 21 years ago.