Market lowdown - less scaremongering and more straightforward, please

First-time buyers and homeowners seeking to sell alike are worried and confused about the current state of the housing market. With the average five-year mortgage rate hitting a 12-year high in light of the panic caused by the mini-Budget, and financial pressures from the rising cost of living placing a huge strain on households, people are being forced to reassess their lifestyles and possibly reconsider where they choose to live.

With this in mind, Watermans, a legal and estate agency firm based in Edinburgh, has produced a piece for their blog to offer some expert advice. We reproduce the piece in full below for EAT & LAT readers.

We all know it’s a scary old world out there. It seems as if it’s been one bad thing after another since 2020. And now it’s the housing market’s time to be the centre of the doomsday tabloids. It can be confusing and worrying if you’re a homeowner or were hoping to get on the ladder soon. But we’re here to separate the dramatics from the facts, the headlines from the expert research and the conspiracy theories from the advice from actual people in the know.

No one likes a weak pound

The big one this week has been that banks have stopped approving mortgages altogether due to the drop in the pound. And no one wants the housing market at a standstill. So, is it true, or has been completely fabricated for clicks?

Tzana spills the tea

We spoke with Tzana Webster, Watermans Director of Property Sales. In short, she said:

“They’re definitely still lending. I spoke with two mortgage brokers yesterday (September 28th 2022) and they both said that they had new products agreed upon with their buyers that day. Buyers can still get a mortgage. Big time scaremongering.”

That’s you telt!

The long of it is that – yes, the pound is weak and the banks have scrapped some of their mortgage products. But, the products are being replaced with new ones that suit the latest interest rates. So you can very much still be accepted for a mortgage and move home.

Straight from the horse’s mouth

We also spoke with Darren Hunter, Cert CII (MP), Mortgage & Protection Specialist at Hunter Wealth Management:

“Lenders aren’t pulling products because they do not wish to lend. They’re withdrawing products temporarily because they are no longer profitable for them due to the economic climate we are faced with at this moment. The news makes this sound a lot worse when in fact, as the current products are no longer profitable, they cannot afford to keep them in the market whilst they reprice and relaunch new products. There may have been less products at the time of the headlines, but in reality – lenders withdraw and reprice products on a weekly basis.”

What happens next?

Because of the rising cost of living and no certainty around wage increases, buyers will likely want to keep their monthly mortgage payments to a minimum. But due to the increasing inflation rates, monthly payments will increase because the interest rates are increasing.

To keep them manageable, buyers will likely want to put down a more significant deposit to offset the increasing interest rates of their monthly payment options.

Bigger deposits paid from buyers mean less money to go over home report value. So we will likely see the trend of houses selling for tens of thousands over the home report value level out and property sales being agreed for at home report value or just slightly higher.

Don’t get us wrong – there will definitely be those extra special properties that get those extra special prices, but seeing 10%, 20% or even 30% over the home report value as the “expected norm” may be fewer and far between.

Should you stay or should you go now?

Although we try to avoid clichés there really is no other way to describe the situation than “swings and roundabouts”. There is still a shortage of good, quality houses available on the open market and a strong level of keen and ready buyers. With high demand and low supply, you will see the property market remain stable.

But for a property seller – if you accept an offer at your home report value or just slightly higher, that means that you can expect to do a similar thing on your next home purchase when you come to buy: at home report value or slightly higher. If you sell for less, the odds are you will pay less for your next purchase.

*The original blog can be seen in full here