Monday November 14, 2022


We asked a team of property experts the most pressing questions of all; then we translated their answers into language we can all understand


The housing market can be ­a confusing and frightening arena at the best of times – and let’s face it, these are not the best of times. Because the cost of housing is such a big part of household expenditure – whether on a mortgage or on rent – and because home ownership is such a significant store of capital for the nation, the state of the housing market is a vital indicator of economic health for all of us.
That means that pundits of all kinds are constantly sounding off about a rise in this or a fall in that, about whether this vital indicator is about to fall off a cliff or that one is about to go through the roof, while most of us just scratch our heads.
Buyers and sellers (and those who dream of­ joining their ranks), are beset with uncertainty and have lots of queries for the experts – and hugely significant sums depend on our understanding the answers. But too often the responses are phrased in jargon and market-speak that we normal human beings can’t understand.
So what is really going on? We asked a team of property professionals, financial brokers and market commentators 20 key ­questions – and then translated their answers for you. Clarity starts here.


1 – How is the market behaving?

It’s splintering. Purchasers who need mortgages are stalling, faced with alarming repayment rates on top of rising costs of living. Those who don’t are divided: some are pausing, while others are moving ahead, particularly if they can spot an opportunity. There’s a further group, too, says Kate Eales of Strutt & Parker. “Those who have mortgages with expiry dates, under pressure to seal the deal on a new home before that happens.”


2 – House prices: what’s happening?

The heat has come out of the market, although statistics are taking time to catch up. Latest figures from HMRC, which cover the number of homes sold in September, show that the market has been resilient. “But these sales will have gone through with mortgages agreed three to five months ago,” explains Frances McDonald of Savills Research. Her team tracks properties where sales have been agreed, but the legal process has yet to complete. It shows a small uptick in the number of sales falling through, “but not as high as we were anticipating after the mini-budget”.
Many experts agree that the market is overheated to the tune of 20%. “It’s the Covid premium,” explains Rob Fanshawe of Property Vision, a buying agency, referring to a bounce in the market that took place following the first lockdown. “Prices will probably go back to where they were in December 2019 as that’s where property valuers are heading.”
Rising mortgage rates put a downward pressure on house prices, but against a backdrop of high demand and lack of supply, the effects aren’t huge –yet. “It’s a return to a more normal market – the last few years have been crazy,” says Rob Dix of Property Hub, an online property-advice platform for investors. In expensive areas (eg the South East) where affordability is stretched, the impact of increasing rates will be greater and there might be a drop in ­values over the coming months.


3 – Should I buy now?

A recent survey from the Building Societies Association revealed that the number of people who think it’s a good time to buy has fallen to its lowest level since 2008. But historically, people have tended to do better when taking the plunge and buying when the majority are nervous rather than when the market is buoyant and booming. “If you’re buying for the long term, have found the right house then go for it,” says Eales. “Buy if your mortgage rate offer starts with a one or two,” adds Mark Harris of SPF Private Finance, a mortgage broker, “but be wary if it’s five or more.”


4 – What about the prime country house market?

The country market dances to a different tune than the market in towns and cities. Sellers are often more discretionary. If they don’t think they’ll achieve the right price, they’ll sit tight. There’s also the unpredictable factor of emotion, too.
Owners have been known to sell to an underbidder because they feel a responsibility to handover a much-loved house to people they feel will ­contribute to the community.
Ultimately, demand is driven by lack of stock. With so little on the market, owners sit in houses that are too large for them waiting for the “right” price, which stalls the market, adds Fanshawe. Buyers moving up are searching for a home that will be theirs for 20 years or more. As a result, people with money are waiting on the sidelines, regardless of what’s going on with the economy. Only last week one agent reported being in a bidding war with three others for a house that was on the market for over £4 million; all of them were cash buyers. “My advice is to negotiate hard and get a discount,” recommends buying agent Jess Simpson. “This way you can factor in any future price falls.”


5 – First-timers: What to do?

This is arguably the segment hardest hit by the current economic squall. For first-time buyers, it’s all about affordability, and that has gone dramatically downhill. There are few high loan-to-value mortgages – those that typically target first-timers – on the market now. This comes on top of a cost-of-living spike that has taken a big bite out of disposable income. However, some good news that got lost in the maelstrom of recent weeks was that the new Chancellor has kept in place the doubling of ­nil-rate Stamp Duty band from £125,000 to £250,000 in England and Northern Ireland. There’s a likelihood that empty nesters will boomerang back home.


6 – Should I rent instead?

Jo Braithwaite’s story is typical of many. She and her husband, Alex, have been looking for a house to buy in Somerset for four years. Their budget was impacted during the pandemic, when not only did Alex start to work for himself, limiting the amount of money they could borrow, but the “Covid exodus” out of cities pushed rural values up. They had an offer accepted on a house on the day of the mini-budget. When they submitted their mortgage application, all the products they’d been banking on were pulled.
“Initially we panicked, but our broker pointed out that it was only a matter of time before relevant products came back to the market,” says Jo. Sure enough, they applied for another mortgage at 4.44%  and are waiting for the offer to come through. “Whether the seller is prepared to bear with us for that long remains to be seen.” If the sale doesn’t go through, they are preparing to move into a rental to bide their time.
The challenge for the Braithwaites is finding something to rent – stock is historically low and rents are growing very strongly. “When there is a change in the sales market, the rental one immediately reacts and we’re seeing a lot of movement,” says McDonald. In London, the rental market is generally in a strong position although some caution has crept in, says Tom Chambré of Chambré London, a lettings and management firm. “Since the mini-budget, people are taking stock before committing.”


7 – What about mortgage rates on affordability?

At least 100,000 people a month are coming to the end of their current deal and will be looking for a new product. Those who are in immediate trouble are those who bought recently with variable rate mortgages: rates have surged upwards at the fastest rate in a decade. Here’s a typical tale of someone trapped, who wishes to remain anonymous: “My boyfriend bought his house for £499,995 with a 1.44%  mortgage fixed for two years. The deal runs out this month and the bank quoted him a rate of 5.5 last week.” That’s a huge leap.
No one is anticipating rates to drop back rapidly. Commentators anticipate it will take between 12 to 18 months before the impact of these new rates combined with the cost of living and inflation will have a downward impact on house prices.


8 – What is negative equity?

A miserable experience for anyone involved. It’s when a property is worth less than the mortgage on it, meaning the owners are trapped between selling at a loss or battling repossession. The last major crisis in the UK happened in the early 1990s. But as the Bank of England continues to raise interest rates to try and tackle runaway inflation – some are predicting the base rate could be 6% by June 2023 – and mortgage rates often hover about 1% above that rate, repayments are going to be expensive. This is particularly trying for the 80,000 people, many first-­timers, who bought with a 10% deposit. They would all be in negative equity if prices drop by 20%


9 – Why are chains such a problem right now?

The process of buying a house relies on a delicate communication between a set of easily combustible parts. The chain begins with someone who is only buying, and ends with a vendor who is only selling. The “links” are the people in between who need to do both. And often on the same day.
What’s holding things up further is the fact that lending criteria have become much stricter. Also, conveyancing solicitors are overwhelmed with work. On average, it’s taking five months to complete a purchase – up 23% on 2019. What are the options to avoid this ­problem? Finding a solicitor who has fire in their tank. Word of mouth far outweighs any online search – and avoid the temptation to opt for the cheapest one.


10 – My mortgage is expiring soon, what should I do?

While it might be tempting, Harris says it’s not worth paying a penalty to get out early and fixing a new rate with another lender now. There has been a panic – and scary headlines in the press – about lenders pulling mortgage products but, says Harris, they were doing this with good reason: with so much turmoil in the market, they simply couldn’t price them correctly. “Bear in mind that banks have money to lend and are looking to do just that, so the best thing to do is speak to a broker.”
A fixed-rate mortgage brings certainty as to what repayments will be every month, but with rates so high a variable-rate mortgage might be a way forward, at least temporarily. These are normally priced at 1% more than the Bank of England base rate. According to Money Saving Expert, the cheapest tracker mortgage is 2.95%  currently. “If you’re struggling to pay a mortgage, speak to the lender. There are ways they can help, including giving an interest-only repayment holiday,” adds Harris.


11 – Gazumping and gazundering – can they be prevented?

Gazumping is when a property is sold to a second buyer for a higher price than has already been agreed with the first buyer. In a market like this, gazundering – when a buyer attempts to secure a last-minute discount at the point of exchange – is a more likely scenario. Those considering either should watch out, warns Harris. “Any change in the agreed price can prompt the mortgage lender to renege on the offer and ­reassess affordability. A new mortgage offer is needed before contracts can be exchanged and this can lead to delays.”


12 – Are EPCs worth anything?

Energy Performance Certificates grade each property on their energy efficiency and include recommendations on how to improve the rating. They are a legal requirement. While landlords can’t rent a property with a grade lower than C, most agents agree that, as far as sales go, they get lost in paperwork. But they might play a future role if the government decides to tax properties based on  environmental performance.


13 – Is mobile and broadband connectivity important?

With many working from home now, gigabit broadband and 5G mobile connections are vital, according to Hyman. “Connectivity is the new water pressure when buying or renting a house,” he says. “So often a seller is completely unaware that the property has above-average connectivity, but this USP can be a real deal clincher.”


14 – Is this the right time to extend or renovate?

This is hard to calculate as there’s no guarantee that the money will be made back in price rises over the coming years. “But it might improve the saleability of the house,” says McDonald. “And we have noted that there’s a higher demand for turnkey properties [those that don’t require work].” The phone is still ringing at Cirencester-based architecture firm Yiangou Architects – and the jobs are big, points out director Ross Sharpe. “The clients we deal with take a long-term view and a downward turn in the economy could be an opportunity to capitalise on more availability of builders. We’ve had work coming in ranging from restoration of listed properties to building new houses from scratch.”


15 – Overpaying mortgages – is this a good idea?

There’s no one-size-fits-all answer to this but the key rule is to only overpay if the mortgage rate is higher than the interest rate in the bank. If there’s a higher rate on savings than paid on the mortgage, saving wins, but if the reverse is true, it makes sense to overpay. It’s worth checking if there are penalty fees though. Lloyd Powell runs an antique lighting shop in Gloucester. He and his wife are selling their three-bedroom house in the village of Huntley for £550,000. “We’ve had two offers but viewings dried up after the mini-budget. We’re not in a hurry to sell, so we’ve decided to keep paying off chunks of the mortgage while we wait.”