Playing House

Examining mortgage and housing market trends for the coming year

As far as property goes, and specifically renting and buying, all bets have been off for quite some time.

Covid, and more importantly, Covid uncertainty, has left renters and buyers in a state of flux, while job uncertainty has led to mortgage lenders adopting very much a ‘safety first’ approach.

The result for buyers and sellers has largely been a state of paralysis over the past year-and-a-half, and only on the resumption of supposed ‘normality’ is it possible to start picking out specific trends that may play out over the course of the next year.

Of course, as far as the cherished summer months of the year go, the housing market has largely missed out again, just as it did in 2020. Yet experts believe that will only serve to supercharge events in 2022 when speculators will begin to make up all the lost ground caused by Covid.

Supply and demand

The leading factor behind high house prices in 2021 has been a real lack of demand in the market. This point was accentuated by the ending of the Stamp Duty Holiday at the end of June, and for all the time confidence in job security has been low, so too have people been about buying or selling.

While the housing market in 2021 was typified by frenetic activity due to a lack of supply, in 2022 it is expected to be an excess of choice that will produce the same reaction.

Possible reduction in house prices for 2022

Speculation is that with a sharp increase in properties coming onto the market next year, there should follow a lowering of prices or, at very least, a period where valuations plateau.

It could mean then that house buyers will find the band of houses, flats and investments that were unaffordable in 2021 suddenly become more attainable. However, the mathematics cuts both ways, and if you’re selling to buy, beware you may be struggling to hit the same sale price you would have during the first half of this year.

Mortgage rates

The current 30-year mortgage interest rate sits at around 2.8%, and forecasters believe this won’t change significantly over the next year or so. Buyers should expect a gradual increase as the economy moves back up to full recovery, but the prediction is that by the middle of next year they won’t have moved beyond 3.1%.

For shorter-term mortgages, notably 15-year terms, a current rate of 2.2% is expected to climb no higher than 2.4% by mid-2022.

This preserving of market confidence is crucial in fuelling what is expected to be a high-volume industry next year.

Renting and first-time buyers

The risk element has meant mortgage lenders are favouring those with big deposits, with loans significantly more affordable for those ploughing cash reserves into their project.

This is bad news for first-time buyers whose progress has been put back significantly by the spectre of Covid.

However, it’s not all bad news for people who continue to find it difficult to get on the property ladder. Statistics show the average tenant in Britain is currently spending £71/month less than if they had bought the same property with a typical 10% deposit.

This is the first time in over eight years that renting has worked out cheaper than a mortgage.

Late-winter surge

Those looking to make moves in the housing market should prepare for action almost as soon as the New Year comes around, presuming the pandemic hasn’t in any way set us back again in respect of further lockdowns or imposed limitations.

As usual, getting to the front of the queue may mean picking up the best deals.