Monitoring the housing market is very important for many, particularly those doctors and dentists who are looking to purchase their first home or who are investing in buy-to-let properties. Our monthly Property Price Update gives you a summary of what the experts are saying.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
UK Property Market Update
Annual house price growth took a bit of a downturn last month, falling to -3.8% after dropping to -3.5% in June as well. Despite only being a few percentage points below the previous month, it marks the weakest outturn since July 2009. Because of this, the price of a typical home is currently 4.5% below the peak experienced in August 2022. The average house price was down slightly from £262,239 in June, to £260,028.
The projected path of interest rates has been a point of contention for many in the industry over the last few months. The projected Bank Rate peak fluctuated between 5% in mid-My to 6.5% in early July. And despite expectations settling in recent weeks, longer-term interest rates which are used to underpin mortgage pricing, remain elevated.
Because of this, those looking to buy a home using a mortgage can expect to stretch their baseline of affordability during the process. As an example, a prospective buyer earning the average wage and hoping to buy a typical first-time property with the standard 20% deposit and an assumed 6% mortgage rate should expect their mortgage to comprise about 43% of their take-home pay. Quite the jump from last year’s 32% and the long run average of 29%.
Putting together a deposit remains an obstacle for home buying hopefuls as a 10% deposit is now equal to 55% of gross annual average income. The lack of affordability explains the subdued market activity in recent months, with just 86,000 completed housing transactions in June, 15% below the levels recorded last year and 10% below levels from before the pandemic.
There did seem to be a slight uptick in activity in June, but many of the applications in question pre-dated the recent interest rate rise. However, activity is still 20% below 2019 levels.
Looking ahead
Despite all this, a soft landing is still achievable, according to experts, as long as the broader economy evolves in line with industry forecasts. Of particular interest is that the unemployment rate, currently sitting below 5%, remains low, and that the majority of borrowers can weather the storm against high borrowing costs.
Housing market activity is likely to remain subdued in the near future, but housing affordability should improve over time. With healthy rates of nominal income growth, lower house prices, and hopefully mortgage rates moderating, it should be possible.
Stay in the know
If you’re planning to buy or sell property this year, check back monthly for our regular update on the nation’s property prices and contact one of our advisers for personalised advice.
Figures quoted from Nationwide House Price index – July 2023.
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