As house prices continue to climb we ask if the property market will ever cool off in 2022?

August, 2022

As house prices continue to climb we ask if the property market will ever cool off in 2022?

After more than  a year of soaring prices, interest rates and energy prices, the economy has entered a sate of flux. And yet, the property market is still defying expectations. Despite predictions of a summer property slump, the average price of property coming to the market hit a sixth consecutive high in July 2022, reaching £369,968 according to Rightmove’s House Price Index.

Amid that growth, how will the rest of 2022 play out for the housing market? Will the much-discussed post-summer slump actually take hold, or will the back to school year see a drive to buy with prices set to continue? To assist buyers and investors navigate another unusual year in property we have analysed buying patterns to review what we are likely to see over the rest of 2022.

Fears around a ‘burst bubble’ or a radical drop in house prices are unlikely. We aren’t seeing a significant drop off in buyer interest and despite higher mortgage rates, demand remains steady. To support this Zoopla’s House Price Index July 2021 figures show that property demand still remains 25% above average over the last five years, on par with year on year figures.

Following the stamp duty led home moving frenzy of summer 2021, there’s still a striking mismatch between supply and demand of properties, with housing stock at a particular low. As Halifax has noted, the ongoing supply-demand imbalance led property prices to rise year on year in June by 13% the highest since late 2004.

Although we wont see rapid rises or significant slumps in pricing in the remainder of 2022 we do see signs of a levelling off of housing prices. Given the Bank of England interest rate hikes, higher mortgage rates and the cost of living crisis impact on home buyers, house price growth looks to remain relatively static for the remainder of the year, with the cost of living crisis likely to impact the number of homes being sold. We expect slower growth but no significant fall over the medium or long term. Mortgage rates have been rising quickly in 2022 off the back of five increases to the Bank of England base rate. This summer’s further interest rate increase to 1.75% - the sharpest for more than a quarter of a century means mortgage lenders will once again increase their rates.

When interest rates change, it always creates a flurry of new applications, leading to a backlog that can take weeks to clear. We expect to see people who are looking to buy or those looking to re mortgage in the next four months try to secure a mortgage rate as soon as possible to avoid further rate increases this year.

Those not on fixed rate mortgages are expected to be hit hardest; traders are forecasting that interest rates will peak closer to 3% in the early part of 2023, implying at least two more 0.5% increases by the end of 2022.

Enhancing this further, the Bank of England’s decision to scrap the mortgage affordability test will help many people who were previously restricted on their lending and see more come to the market. However, this is unlikely to lead to a rush to market as mortgage borrowing will still be dictated to by the buyers deposit and a cap that lenders will have on a number of mortgages that they can lend above 4.5 x income.

If you are looking to buy soon and wish to register with us, we would be pleased to hear from you with your specific requirements. Telephone 01608 801030 or email in the first instance.