Will house prices drop in 2022? | The Sun

Will house prices drop in 2022? | The Sun

November 26, 2022

HOUSE prices remain high across the UK with the average property price standing at £294,559 – but could they fall?

Average UK house prices soared by 9.5% in the year to September, according to the ONS.

Property prices surged last year due to pent-up demand following coronavirus, a lack of homes on the market driving demand up and the end to the stamp duty holiday.

The latest data from the Land Registry shows that the average house price in September stood at a record £294,559.

And on September 23, the government announced a permanent cut to stamp duty in a bid to boost economic growth.

The announcement means no stamp duty is paid on the first £250,000 of any property, up from £125,000 previously.

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For first-time buyers, the threshold is now £425,000, up from £300,000.

The maximum value of a property on which first-time buyers' relief can be claimed will also rise from £500,000 to £625,000.

But the new government under Rishi Sunak has confirmed that it will axe the stamp duty cut from March 31, 2025.

It comes after property prices came under immense pressure after mortgage rates shot up following the disastrous mini-Budget and amid rising inflation which sat at 11.1% in October.

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The Bank of England (BoE) also hiked its base rate to 3% earlier this month, piling pressure on mortgage owners.

It increased its rate from 2.25% to 3% – the biggest single rise since 1989, in a bid to slow soaring inflation and encourage people to save.

But The Bank used its announcement as an opportunity to revise its predictions on how much interest rates will rise in future, and this has brought some relief to mortgage bills.

After the Mini-Budget it had warned that they would hit 6% next year, which caused mortgage lenders to hike fixed bills.

However, today it said that rates would hit a maximum of 4.6%.

In an unprecedented move, Barclays became the first bank to cut bills for mortgage customers on standard variable rates, known as SVRs – and other lenders then followed.

But what does it mean for house prices for the rest of the year?

Are house prices likely to go down in 2022?

House prices went up, not down, following the last stamp duty holiday, in July 2020.

Then Chancellor Rishi Sunak announced the freeze in a bid to stimulate the housing market.

But rising interest rates, which have caused mortgage rates to skyrocket will mean house prices are likely to drop over the next couple of months.

The Bank of England does expect the recent falls in house prices to continue due to higher mortgage rates.

Meanwhile, Nick Morrey, from mortgage company Coreco, said house prices would fall next year but that nothing would happen straight away.

He added: "This is what we expected and the markets were expecting."

House prices also tend to fall in November and December every year as demand falls around this time.

In its latest economic outlook, Lloyds Banking Group has said it expects house prices to fall by around 8% in 2023.

The banking group owns Lloyds, Halifax and Bank of Scotland and is the UK's biggest mortgage lender.

In an update to its economic forecasts, the bank said that it believes the Bank of England (BoE) base rate will reach 4% by the end of the year.

Of course, it's worth noting that predictions are just that and that no one can say for sure.

But if inflation improved and interest rates stabilise, Lloyds said house prices could fall just under 3%.

The predictions came before Halifax said the average house price dipped in October after mortgage interest rates soared in the previous month.

The annual rate of house price growth also slowed to 8.3% in October from 9.9% in September – returning to single digits for the first time since January.

A typical UK property now costs £292,598, according to Halifax’s index.

But the most recent data from Rightmove said that house prices aren't falling as much as originally anticipated, despite recent turmoil in the mortgage market.

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The average asking price on a property hit £366,999 in November – a decrease of £4,159 in October.

The property website said shortages of property for sale continue to underpin prices.

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