Will house prices continue to rise?
After an extremely busy 2021, we have looked at different sources to see what their predictions are for the property market in 2022. We have looked at a few different sources for predictions on property price growth and also at what the year holds for mortgages. Please find the information below with a few words from our company director on what he believes the Telford property market will do this year.
“The stamp duty holiday resulted in house prices soaring and properties flying off the shelves in 2021. The perfect storm of tax savings and changing buyer priorities meant prices rose by as much as 10%, but experts believe growth will drop to nearer 3-4% next year. Slower prices rises will provide some respite to prospective first-time buyers, who might find they have a better chance of getting on to the property ladder in a less frenzied environment.
We’re likely to see fewer homes coming on to the market in 2022 and a big drop in the number of transactions going through. The stamp duty cut and the end of Covid-19 lockdowns meant many people moved sooner than they otherwise would have done this year, resulting in transactions peaking at nearly 200,000 in June – double the figure we would see in a ‘normal’ year. A lack of supply will prevent prices from falling and keep the market steady. On the plus side, it might also mean an end to the huge delays that have affected mortgage approvals and slowed down moves this year.”
“We predict that the national asking price of a home – which is currently £342,401 – will rise by 5% next year, which will mean an increase of about £17,000. This is because we’re still seeing a huge number of home-hunters looking to move, and not enough homes available to buy, so the imbalance continues to push prices up. However, 2022 is set to bring fresh opportunities for new year buyers. We’ve already seen a 19% jump this month in the number of people requesting for estate agents to value their home, compared with the same period last year. With more homeowners getting ready to move, we can expect to see more properties for buyers to choose from in the new year, which will also slow down the pace of price growth.”
The mortgage lender said it expected the red-hot increases in average house prices over the last two years – 8% so far this year and 6% in 2020 – to end, with growth forecast to be “broadly flat” in 2022. “With the prospect that interest rates may rise further in 2022 to subdue rising inflation, and with government support measures phasing out, greater pressure on household budgets suggests house price growth will slow considerably,” said Russell Galley, the managing director of Halifax.Halifax expects strong housing price levels to be maintained – but that growth in 2022 would be between flat and 2%.
What will happen to mortgages?
4. All eyes will be on inflation and the base rate. Inflation will be a big theme in the new year. The Bank of England increased the base rate to 0.25% earlier this month in response to soaring inflation, and it could rise further in 2022. The base rate affects the cost of borrowing for mortgage lenders, so any increase will almost certainly result in higher mortgage costs for consumers. The good news is that the starting point for rate rises is incredibly low, with mortgages having become very cheap in the second half of 2021. So while it’s highly unlikely we’ll see the battle to offer sub-1% mortgages repeated next year, don’t expect rates to soar either.
5. Mortgage lending will fall significantly. UK Finance predicts mortgage lending will drop by £35bn in 2022, in what it describes as a ‘return to more stable levels of activity.’ Fewer people buying homes should result in a calmer mortgage market, with more activity likely to come from existing homeowners remortgaging and less from people buying homes.
Could 2022 be a good year for first-time buyers?
6. Affordability tests could help buyers on to the ladder One of the biggest challenges facing first-time buyers is that they can’t borrow enough to keep pace with rising house prices. Banks are only allowed to approve 15% of mortgages at more than four-and-a-half times the applicant’s annual salary, and other affordability tests can lock those with lower incomes out of homeownership. The Bank of England could be set to relax one of its key lending rules in 2022, however. It’s going to consult on removing the rule which requires lenders to ensure borrowers could afford a 3% rise in their mortgage rate before they approve their application. The change could be the difference between being accepted or rejected for a mortgage for some applicants, and could help many more take out bigger loans.
7. Mortgage terms will get even longer Rising house prices have resulted in first-time buyers needing to take on longer mortgages. While 25-year mortgage terms were once standard, we’re now seeing 35-year and even 40-year mortgages becoming more common. This trend is likely to continue, and there are rumours that a 50-year mortgage could soon be on the way. If you are considering applying for a mortgage in 2022, it’s worth taking advice from our in house broker Lorraine on your options and the best term for you. A longer mortgage term will cut your monthly repayments, but it’ll also mean you’ll be paying back the loan for much longer and pay more interest in the process.
8. 90% and 95% mortgage rates will remain attractive. 90% and 95% mortgage rates have fallen steadily in the last few months, and analysis from Moneyfacts found average rates on 95% deals have dropped to the lowest levels since it started keeping records in 2011. The return of low-deposit mortgages in the second half of 2021 was in part stimulated by the introduction of the mortgage guarantee scheme. And with the government continuing to push other initiatives such as First Homes and Help to Buy, it’s unlikely lenders will turn away from first-time buyers with small deposits in 2022. If and when we do see a further rise in the base rate, it’s likely that 90% and 95% mortgages will be less affected than cheaper deals at lower loan-to-value levels.
What other trends will we see in 2022?
9. Mortgage payment holidays could still cause problems. The government’s coronavirus support measures have come to an end, but it’s likely that some homeowners will be affected by their legacy in the new year. Formal mortgage payment holidays weren’t registered as missed payments on credit reports, but any additional support (such as suspending interest or extending the term of the loan) was flagged by lenders. The knock-on effect of these support measures is that some borrowers may find it harder to remortgage to a better rate or take on additional borrowing when lenders assess their applications.
10. The ‘Buy Now, Pay Later’ boom could affect mortgage applications ‘Buy Now, Pay Later’ (BNPL) schemes have become hugely popular, but there are concerns over how lenders factor BNPL debts into mortgage calculations. Our recent investigation found that only four of the biggest 10 lenders ask specifically about BNPL commitments when you apply for a mortgage agreement in principle. This means debts may not come to light until much later in the application process. With BNPL showing no signs of disappearing, lenders and borrowers alike could face issues in 2022. The onus will be on banks to come up with a clear and consistent method of capturing BNPL agreements alongside other credit such as credit cards and loans early in the application process.
11. Banks will focus on fees and incentives rather than rates As we mentioned earlier, mortgage rates are likely to rise in 2022. The good news is that lenders are finding other ways to entice prospective customers. The most likely outcome is a growth in the number of fee-free mortgages and cashback incentives, both of which fell away when rates dropped earlier this year. At the moment, up-front fees on mortgages can be as high as £1,499 to £1,999 on the cheapest deals, but don’t be surprised if that changes in 2022. Getting your mortgage fee-free can make a big difference to the cost of your loan, but be wary of cashback deals. The money on offer is usually relatively small (around £500) and is only paid after the loan starts.
Our Managing Director / Valuer’s View
The property market has been the busiest I have seen in the last two years, than at any other point during my career in estate agency. We have helped hundreds of buyers and sellers move from property to property and have seen estate agency change both in terms of the use of technology in marketing and the way each sale is having to be managed to deal with the shear amount of demand.
In 2020 and 2021 the market was driven by low supply and stamp duty relief which caused a frenzy in the market. Although stock levels seemed lower to buyers with less available, valuations, instructions and sales were all up on previous years. Back in 2010 there were around 2000 properties available on the market at any one time, with the figure currently being around the 300 mark in Telford. Although the stock is there most of it is sale agreed which shows a very buoyant market place.
I expect 2022 to be another busy year and stock levels to recover slightly making it a little easier for people to move. Demand will also remain high and prices will also continue to rise but not at the pace they have done over the past two years. Growth of 10% to 13% has been seen locally over the past 18 months and I expect this to slow to around 5% this year. This still represents excellent growth in comparison to pre-pandemic years.
If you are thinking about moving in 2022, why not give us a call for a Free Valuation on 01952 701019 or email us using firstname.lastname@example.org. Alternatively you can click learn more or visit our valuation page by following the link below…