Are you concerned about the housing market?
Are you concerned about the housing market?
With the constant negativity being issued in the mainstream media, it's hard not to be, right!?
But we have looked at some real time data, received updates from mortgage brokers and have been supplied information that we thought our client base need to hear.
Are you concerned about the housing market?
With the constant negativity being issued in the mainstream media, it's hard not to be, right!?
But we have looked at some real time data, received updates from mortgage brokers and have been supplied information that we thought our client base need to hear.
Now, its no secret that the housing market is 'headline sensitive'. The mainstream media have a habit of using exaggerated headlines in order to draw 'clicks' or attract comments, likes and shares on social media & sell papers. Ultimately, fear sells and unfortunately that is generally how consumerism thrives (perhaps more on this another time). However the effect these 'clickbait' headlines have on the housing market, generally causes panic, hesitation and sometimes withdrawal - hence the 'headline sensitivity'.
Over the last couple of days, we have seen headlines such as 'Almost 1,000 mortgage deals pulled as panic grips UK housing market' - The Guardian & 'Record number of UK mortgage deals pulled in one day as market mayhem takes hold' - CNBC. The market has been compared to the 2008 financial crash, instilling further fear and almost forcing the public into a state of panic over what might happen (a form of self fulfilling prophecy if you like), however, here are some facts as to why what we are seeing is nothing like the 2008 crash:
- LTV's are much lower than 2008, due to banks no longer offering 100% mortgages and repayment mortgages being in place as apposed to interest only, which generally speaking has only been available for buyers with £300k+ deposits and under special lending terms.
- Since 2014, buyers have been 'stress tested' based on affordability up to 6-7% interest rates. Thus reducing the risk of mass repossessions.
- The unemployment rate peaked at 10.6% in 2010 compared to the unemployment rate for May to July 2022 decreasing by 0.2 percentage points on the quarter to 3.6%, the lowest rate since May to July 1974.
- 2008 saw an over supply of property coming to market, compared to a lack of supply in 2022.
- Lenders withdrew deals in 2008 due to uncertainty in the market and house prices falling, however, what's happening now is lenders re-pricing.
To elaborate further on that last point, Lenders aren’t pulling products because they don’t want to lend. They’re withdrawing products temporarily because they’re no longer profitable, they can’t afford to offer them while they prepare to launch new ones, in a nutshell.
Lenders and products will be back, just at higher prices, therefore, this is not the same situation as 2008.
To delve into this a little further, our mortgage broker has sent us this information to share:
The market volatility is stemming from an unprecedented increase in swap rates. Swap rates are used by lenders to 'hedge' against the interest rate risk posed by offering fixed rate mortgages. Lenders effectively pay a counterparty to "swap" their fixed rate risk for a variable rate, locking in their margins but also adding to the total cost of providing that mortgage to the customer. Rather than do this mortgage by mortgage, lenders tend to buy 'hedging' in 'tranches' to support the provision of all their fixed rate mortgages for a period of time.
When the hedging is gone, they either need to buy more to keep the product on sale, or withdraw products quickly to avoid selling mortgages which aren't hedged, or maybe aren't even profitable. Alongside dealing with service issues, this is normally the primary reason lenders remove products from the market quickly.
In simple terms if the swap rates are higher, the lenders will increase mortgage rates, which is what we are seeing in them withdrawing products and re-pricing.
Even with the above in mind, the housing market still remains fairly busy with some real time data shared with us this morning by Rightmove:
- The number of sales agreed on Tuesday was the highest number in one day since early August
- Buyer demand over the last month was 20% higher than the pre-pandemic five-year average
- Asking prices are 15% higher than they were two years ago, and they are just a few thousand pounds shy of a price record.
- A number of mortgage products have been withdrawn, but according to Moneyfacts there are currently over 2,600 mortgage products available in the market.
Of course, the housing market moves very quickly and we will do our best to keep you informed as we learn of any changes.
We hope the above is insightful and gives you reassurance if you are hoping to move in the near future and if you have any questions, feel free to get in touch on 020 8935 5256.
Thanks for reading.
The Property Cloud.