House prices expected to fall in 2023

In the real estate company’s latest house price index, the firm also found that current house price growth hit 8.1%  – while the political and economic turmoil over the past few weeks has resulted in average rates spiking above six percent.  

Looking at new buyer demand, this fell by a third since the mini-budget – although it’s similar to what typically happens in late November ahead of the Christmas slowdown, with this drop in buyer interest being spread uniformly across all markets.  

However, those with cheap loans secured – as well as cash buyers – are continuing to make offers and agree on sales, albeit at a slower rate than this time last year, dropping by 25% when compared to 2021.  

Despite this, the pent-up demand to move remains with Bank of England data for mortgage approvals showing an unseasonal jump in mortgage approvals in August, up 17% over the month. According to Zoopla, this demonstrates an underlying desire to move among a proportion of households – driven by the pandemic and other factors.  

Looking at mortgage rates, it expects to start to decline in this area before the start of 2023 – with this continuing into next year and is unlikely to return to the ultra-low levels of recent years. As such, mortgage rates of between four and five percent are set to become the norm moving ahead.  

As for the levels of negative equity, this is expected to remain minimal by historic standards. A nationwide 10% fall in house prices would result in a small handful of negative equity cases from purchases with high loan-to-value mortgages in 2022 – highlighting how the housing market has been increasingly driven using equity more than borrowers reliant on high loan-to-value mortgages.