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 slowed even further last month, falling to -5.3% after dropping to -3.8% in July. This now overtakes the previous month’s record as the weakest rate seen since July 2009. After taking into account seasonal effects, prices fell 0.8% over the month. The average house price was down slightly from £260,028 in July to £259,153 in August.
Looking ahead
This furthering weakness of house prices doesn’t come as a surprise to those in the industry as the cost of borrowing has increased rapidly in recent months, bringing housing market activity down to well below pre-pandemic levels. Mortgage approvals, for instance, have been sitting at 20% below the 2019 average recently and mortgage application data suggests this weakness has been maintained over the last few months.
But all hope is not lost as experts believe that a soft landing is still possible, as long as the wider economy evolves in line with forecasters’ expectations. For example, if the unemployment rate remains below 5%, as expected, then most existing borrowers should be able to withstand the higher borrowing costs as the majority are on fixed rate mortgages and those who do need to seek a new mortgage will only be granted one if they can prove they can afford the higher payments.
Despite the optimism, activity will likely remain subdued, at least for the near future. But if nominal income continues to grow, house prices remain lower, once the Bank Rate peaks, housing affordability should improve over time.
Cash is king, at least in the housing market right now
An analysis of housing transactions in the first half of the year reveals that cash purchases, while down from the highs of 2021, have been incredibly resilient. The weakness of mortgage activity is the result of the rising mortgage rates, so cash buyers aren’t affected. While numbers for movers with a mortgage, first-time buyers, and buy-to-let purchases are all still lower than pre-pandemic levels, cash purchases were actually up 2%, compared to 2019.
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 – August 2023.
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