According to the latest HPI data from Nationwide, the UK housing market has experienced a significant downturn, with house prices falling for the seventh consecutive month. 

This trend can be attributed to the turbulence caused by the financial markets, which has had a significant impact on the overall health of the housing market.

The downward trend in house prices is a result of a variety of factors, including economic uncertainty caused by the war in Ukraine, rising inflation, and a decline in buyer confidence.

The decline in house prices has been most pronounced in certain regions, such as London and the South East, where prices have dropped by a considerable margin. 

However, other regions have also experienced a decline, albeit to a lesser extent.

Who benefits when house prices fall?

When house prices fall, it’s generally buyers who stand to benefit the most, as they can purchase property at a lower cost. This is especially true for first-time buyers who are struggling to get onto the property ladder due to high house prices.

In addition, falling house prices can be advantageous for those looking to upsize or move to a more expensive area, as it means they can potentially afford a larger or more expensive property than they would have been able to previously.

In the scenario where you are upsizing and experiencing a financial loss on the sale of your current home, it’s possible that you could still save money overall by securing a larger discount on the new, larger property.

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Whether you’ve just had an offer accepted on a property and you’re ready to go, or you’re simply wondering how much you need to save for a deposit, it’s never too soon to reach out.

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What impact does falling house prices have on existing homeowners? 

Falling house prices can have a range of negative impacts on existing homeowners, including:

  • Negative equity: When the value of a property falls below the outstanding mortgage balance, the homeowner is said to be in negative equity. This can make it difficult to sell the property or remortgage, as lenders may be reluctant to lend on a property with negative equity.
  • Reduced equity: Even if the homeowner is not in negative equity, falling house prices can reduce the amount of equity they have in their property. This can make it harder to access the equity for things like home improvements or other investments.
  • Higher interest rates when remortgaging: If the value of the property has fallen significantly, the homeowner may have a higher loan-to-value ratio when remortgaging. This can result in higher interest rates and less favourable mortgage terms.
  • Difficulty selling the property: Falling house prices can make it more difficult for homeowners to sell their property. Potential buyers may be deterred by lower valuations, and the property may stay on the market for longer periods of time.

The property market is a resilient one 

Although it’s important to remember that past performance is not necessarily indicative of future results, historically, the property market has proven to be a relatively resilient one, with prices typically recovering after periods of decline. 

However, the impact of any downturn in the property market can vary depending on individual circumstances.

If you plan on staying in your home for a prolonged period of time, you may be able to weather any turbulence in the market. 

The short-term fluctuations in property prices may be less of a concern if you are not planning on selling anytime soon. Over the long-term, the value of your property is likely to increase, and any short-term dips in value may eventually be recovered.

On the other hand, if you are planning on owning a property for only a short period of time, any downturn in property prices may have a bigger impact on your position. 

If you buy a property and the market declines soon after, you may find that the value of your property has fallen below what you paid for it. This can make it harder to sell the property for a profit, and may even result in negative equity. 

Therefore, it’s important to consider your individual circumstances and future plans when making property-related decisions.

For more information on getting the right mortgage for you, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.