The average price of real estate on the market increased to £367,501 for the fourth consecutive month. The growth in May was 2.1%, or £7,400 in cash terms, which is the most significant growth at this time of year since May 2014. Additionally, it indicates that in the two years since the housing market halted due to the epidemic, prices for homes have risen by an astounding £55,551. 

The price gains that people have witnessed in homes don’t seem to be slowing down. But the big concern is how long this rent and house price increase will continue and how much is my house worth. And will these start to decline in 2022? Let’s look at it.

Which Is More Affordable: Buying Or Renting A Home?

Rightmove reports that while being just 11% (+£87) higher than ten years ago, the average monthly mortgage payment for a typical first-time buyer house has climbed by 13% (+£100) since December last year as a result of four interest rate increases. Due to historically low mortgage rates, costs are balanced despite the rapid rise in home prices. 

In contrast, comparable monthly rental payments are 40% higher today than ten years ago because tenants are now experiencing the full impact of cost increases, which are currently increasing at the quickest rate ever noted by Rightmove. Rent and mortgage payments used to differ noticeably, but now there is less difference between the two.

How Would Rising Interest Rates Affect Home Prices?

Borrowing money to purchase a property has been absurdly affordable recently because the Bank of England base rate has been at an all-time low. To reduce inflation, the base rate has been raised four times since December and is now at 1%. Mortgage payments may increase due to an increase in the base rate. This could reduce the number of purchasers visiting the market and the rise in living expenses.

When Will The Bank Of England’s Base Rate Be Discussed Next?

On June 16, there will be a new meeting. Every six weeks or so, the Monetary Policy Committee meets to decide whether to raise or lower the base rate. As is well known, the base rate was raised to 1% at the most recent base rate meeting on May 5. Since December 2021, when the base rate was just 0.1%, there have been four increases. It’s always a good idea to talk to a mortgage expert if you have any concerns about how this might affect your mortgage.

What Does The UK Property Market’s Future Hold?

According to Capital Economics analysis, the Bank of England base rate is expected to reach 3% in the second half of 2023, which will impact mortgage rates. Remember that these rates are still historically low when considered in their broader context. 

With so much ambiguity, it’s hard to predict if there will be a market correction in home values. Later in the year and towards the beginning of 2023, the consequences of the growing cost of living and interest rates might affect real estate. We must first determine what is on the other side of the inflation rise to make predictions. 

Forecasts For 2023

Regrettably, more unfavourable news is being predicted by experts. As property prices climb amid rising interest rates and the cost of the living problem, Halifax and Barratt, the nation’s largest lender, foresee a “more challenging period.” The average home price in August 2022 reached an eye-popping £294,260, a record high of 0.4% higher than the previous month.

First-time purchasers are more cautious now that the cost-of-living crisis has become a severe problem. With inflation at an all-time high and interest rates following suit, there is a limit to how much money potential purchasers may borrow. Analysts predict a sharp decline in housing costs shortly, with many construction projects being shelved because of the high price of materials.

How To Progress

Everything may seem bleak for first-time and prospective purchasers, but there are still options to enter the housing market and climb the social ladder. Nowadays, purchasing a home before it reaches the market is the safest option. You will have the edge over other purchasers if you enter the market first for houses.

Final Words

Finally, stay away from chains. Understandably, sellers are warier if you successfully sell your own house before purchasing theirs. You will appeal more to sellers if you break free from a chain.