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| What is happening to house prices and could there be a crash? | What is happening to house prices and could there be a crash? |
| (about 5 hours later) | |
| House prices have fallen in recent months, with increased interest rates making mortgages more expensive and high inflation reducing people's spending power. | House prices have fallen in recent months, with increased interest rates making mortgages more expensive and high inflation reducing people's spending power. |
| However, although Bank of England interest rates have gone up for the 10th time in a row, some mortgage rates have started to fall. | However, although Bank of England interest rates have gone up for the 10th time in a row, some mortgage rates have started to fall. |
| What is happening to house prices around the UK? | What is happening to house prices around the UK? |
| In 2021 and for much of 2022, prices rose steeply - by about a quarter - across most of the UK. | In 2021 and for much of 2022, prices rose steeply - by about a quarter - across most of the UK. |
| The pace of growth was much faster than was seen during the recovery after the 2008 global financial crisis. | The pace of growth was much faster than was seen during the recovery after the 2008 global financial crisis. |
| However, figures from Nationwide and Halifax show consistent falls in the last five months. | However, figures from Nationwide and Halifax show consistent falls in the last five months. |
| The chart above shows that year-on-year growth is heading down towards zero. | The chart above shows that year-on-year growth is heading down towards zero. |
| Nationwide warned the housing market looked set to "remain subdued" in the coming months. | Nationwide warned the housing market looked set to "remain subdued" in the coming months. |
| You can use the chart below to compare what's happened to house prices in different parts of the UK. | You can use the chart below to compare what's happened to house prices in different parts of the UK. |
| Most regions and nations around the UK saw growth from 2015 until the second half of last year. | Most regions and nations around the UK saw growth from 2015 until the second half of last year. |
| Some regions like East Anglia and the North East of England have seen prices flatten out rather than falling in the second half of 2022. | Some regions like East Anglia and the North East of England have seen prices flatten out rather than falling in the second half of 2022. |
| And London, which saw prices fall slightly during the pandemic, hasn't seen falling prices yet. | And London, which saw prices fall slightly during the pandemic, hasn't seen falling prices yet. |
| One thing the chart doesn't show is that house prices in London are far higher than the rest of the country. | One thing the chart doesn't show is that house prices in London are far higher than the rest of the country. |
| Will house prices continue to fall? | Will house prices continue to fall? |
| Monthly changes can be blips, but the UK's largest lender, Lloyds, is planning for an 8% fall in 2023. | Monthly changes can be blips, but the UK's largest lender, Lloyds, is planning for an 8% fall in 2023. |
| In November, the Office of Budget Responsibility (OBR), which advises the government on the health of the economy - predicted that house prices will drop by 9% over the next two years. | In November, the Office of Budget Responsibility (OBR), which advises the government on the health of the economy - predicted that house prices will drop by 9% over the next two years. |
| Big jumps in interest rates have put pressure on the amount people can afford to borrow. | Big jumps in interest rates have put pressure on the amount people can afford to borrow. |
| In turn that means lower offers and less demand for homes overall. | In turn that means lower offers and less demand for homes overall. |
| The amount people can spend of their mortgage also depends on wider cost-of-living pressures, such as energy bills, wages and job security. The future of house prices depends on the economy as a whole. | The amount people can spend of their mortgage also depends on wider cost-of-living pressures, such as energy bills, wages and job security. The future of house prices depends on the economy as a whole. |
| What happens when house prices fall? | What happens when house prices fall? |
| The biggest immediate effect is on people who want to move. | The biggest immediate effect is on people who want to move. |
| Some sellers may decide to delay putting their homes on the market. Homeowners who are considering moving may find they have less money to spend. | Some sellers may decide to delay putting their homes on the market. Homeowners who are considering moving may find they have less money to spend. |
| There were fewer property sales in 2022 than in the 12 months leading up to last summer's surge in prices, before the temporary stamp duty reduction ended. | There were fewer property sales in 2022 than in the 12 months leading up to last summer's surge in prices, before the temporary stamp duty reduction ended. |
| But if interest rates stay high, an increasing number of people will come off fixed-price mortgages (about 100,000 each month) to new, higher rates. | But if interest rates stay high, an increasing number of people will come off fixed-price mortgages (about 100,000 each month) to new, higher rates. |
| Some homeowners will find higher these monthly payments unaffordable, making them more likely to sell. | Some homeowners will find higher these monthly payments unaffordable, making them more likely to sell. |
| First-time buyers may find properties are more affordable, allowing them to get a foot on the ladder - assuming they can get a mortgage. | First-time buyers may find properties are more affordable, allowing them to get a foot on the ladder - assuming they can get a mortgage. |
| But a drop in prices can also send shudders through the finances of homeowners who are staying put. | But a drop in prices can also send shudders through the finances of homeowners who are staying put. |
| At the most extreme, they can end up in negative equity - where the amount they have borrowed is greater than the current value of their property. | At the most extreme, they can end up in negative equity - where the amount they have borrowed is greater than the current value of their property. |
| With about a third of household wealth tied up in home values, falling prices can make people feel less financially secure and mean they save more than they spend. | With about a third of household wealth tied up in home values, falling prices can make people feel less financially secure and mean they save more than they spend. |
| Less spending can make an economic slowdown even worse. | Less spending can make an economic slowdown even worse. |
| Are people struggling to pay their mortgage? | Are people struggling to pay their mortgage? |
| Arrears peaked during the 2008 financial crisis, and did not rise significantly during the pandemic, helped by lenders granting payment holidays. | Arrears peaked during the 2008 financial crisis, and did not rise significantly during the pandemic, helped by lenders granting payment holidays. |
| Payment difficulties can lead to banks and building societies repossessing houses, although lenders try to avoid this. | Payment difficulties can lead to banks and building societies repossessing houses, although lenders try to avoid this. |
| More than 200,000 properties were repossessed in the five years after the 2008 crash. | More than 200,000 properties were repossessed in the five years after the 2008 crash. |
| As a result of Covid, repossessions were suspended between March 2020 and April 2021. In the year after they restarted, there were fewer than 4,000. | As a result of Covid, repossessions were suspended between March 2020 and April 2021. In the year after they restarted, there were fewer than 4,000. |
| What happens if I can't afford to pay my mortgage? | What happens if I can't afford to pay my mortgage? |
| Does a drop mean a house price crash is inevitable? | Does a drop mean a house price crash is inevitable? |
| When the Bank of England raised interest rates by 0.75 percentage points to 3% on 3 November, it was the biggest single rise in the cost of borrowing since 1989. | When the Bank of England raised interest rates by 0.75 percentage points to 3% on 3 November, it was the biggest single rise in the cost of borrowing since 1989. |
| How high could interest rates go? | How high could interest rates go? |
| Why does the Bank of England change interest rates? | Why does the Bank of England change interest rates? |
| After the mini-budget, financial markets were forecasting that the Bank of England's interest rate would rise above 6% in 2023. | After the mini-budget, financial markets were forecasting that the Bank of England's interest rate would rise above 6% in 2023. |
| However, traders now expect the peak to be under 5%. You can use the mortgage calculator above to see how rate changes affect monthly repayments. | However, traders now expect the peak to be under 5%. You can use the mortgage calculator above to see how rate changes affect monthly repayments. |
| In the early 2000s property boom, 100% mortgages and cashback offers were not uncommon. | In the early 2000s property boom, 100% mortgages and cashback offers were not uncommon. |
| But after the 2008 financial crash, mortgage lending rules were tightened. | But after the 2008 financial crash, mortgage lending rules were tightened. |
| As a result, loans should leave more room for prices to fall before borrowers are stuck with negative equity. | As a result, loans should leave more room for prices to fall before borrowers are stuck with negative equity. |
| Most recent borrowers have also had their ability to pay checked against interest rates even higher than the ones we're seeing at the moment. | Most recent borrowers have also had their ability to pay checked against interest rates even higher than the ones we're seeing at the moment. |
| Data visualisation by Rob England and Jana Tauschinski. Additional reporting by Jack Rodgers and Helena Rosiecka | Data visualisation by Rob England and Jana Tauschinski. Additional reporting by Jack Rodgers and Helena Rosiecka |
| Related Topics | |
| Personal finance | |
| Housing market | |
| Cost of living | |
| UK economy | |
| Mortgages |