Residential property specialist, Victoria Cranwell, considers what may lie ahead for the UK housing market in 2022.
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Traditionally, the closing months of the year are quieter for the housing market, but that was far from the case in 2021. While the feeding frenzy of the Stamp Duty holiday has abated, the weeks leading up to Christmas saw a level of transactions more typical of springtime in a ‘normal’ year. Now, as a new year dawns, many of us considering a move will be weighing up what the housing market has in store in 2022.
Housing market predictions 2022
On a positive note, all the indications are that the number of homes coming to market will increase this year. Rightmove reports that the number of estate agent valuations requested through their website jumped by 19% in December. But, unfortunately, they believe this will still be insufficient to meet the level of demand, pushing prices higher. They predict a rise of 5% in house prices this year, increasing the average asking price (currently £342,401) by around £17,000.
Yet, it does seem inevitable that rising costs of living will begin to dampen demand at some point.
When the housing market reopened in May 2020, mortgage availability was a real issue for many, but this improved as lenders sought to take advantage of the increasingly buoyant market.
By the summer of 2021, there was keen competition among lenders for low-risk borrowers, and if you were fortunate enough to have a deposit of 40% or more, it was possible to find interest rates of less than 0.9%. But last month, the Bank of England increased its base rate from 0.1% to 0.25%, and some are predicting there could well be more base rate rises this year as the UK economy battles rising inflation.
Those on fixed rate deals are currently shielded from the rise until the end of their fixed period. For many with variable rate mortgages, the recent increase has not seen payments rise significantly, but another rise, or even two, could begin to significantly squeeze already tight household budgets, particularly with the inevitability of higher energy bills come April.
First time buyer mortgages
Although the availability of mortgages for first time buyers seems to have improved in recent months, the Independent recently reported data showing only one in three first-time buyers received a mortgage offer on their first attempt, down from one in two before the pandemic. Around one in five rejections resulted from an administrative error, with the same proportion rejected for an insufficient deposit. But the most common reason – accounting for more than one in four rejections – was a poor credit history, typically the result of student loans, overdrafts, missed bill payments, or a history of using payday loans.