Mike Collins Mortgage Advice – What is influencing the housing market in 2022

Financial planner Mike Collins explains what today’s buyers are looking for and what we can expect from the market moving forward

With workplaces still changing and lenders’ offers up in the air, 2022 continues to be disruptive. The government’s drastic 45p tax U-turn and calmer market conditions that have followed, haven’t translated into cheaper new mortgage deals…

So, just what is in store for real estate?

Mike Collins Mortgage Advisor, who has 17 years’ experience in the finance industry said: ““We expected to see more stability this year after a bumper year for lending in 2021 – plus there was the stamp duty holiday that stimulated 1.5 million house purchases across the UK. And with huge flexible changes, many people chose to relocate.

“Despite the current fiasco what is clear is that changes made during the pandemic, such as switches to hybrid working, are here to stay. People have had a long time to consider what they want from their homes.”

Rising costs

With inflation at its highest level in 40 years, and disruption in every industry due to a combination of Brexit and Covid-19 pandemic, it’s no surprise that costs are rising.

We’re paying out way more than before for materials and labour costs, plus there is supply chain disruption. Meanwhile, index linking – undertaken to protect against the risk of underinsurance – is also through the roof due to changes in inflation and the cost of living.

This may mean that people are looking to extend or convert their current homes rather than moving, especially given the high cost of moving just now.

Spending habits

Consumers want to spend their money. Having spent months of time locked down in their homes they’ve realised all the DIY that needs to be done – and so those in labouring industries has seen demand outstripping supply across the UK.

And those who are aspiring homeowners are re-evaluating what they want from life, they now have to work remotely so need another area at home, such as an annexe to use as an office. Given all the time they had nothing to spend on, they may have managed to save towards a deposit and/or clear some debt. But they definitely still have cash to spend on renovation projects for the time being.

Energy efficiency

With energy bill soaring with no sign of slowing, prospective homeowners will be keen to seek out properties with the highest energy ratings. They’ll be looking for good quality tripled glazed windows, cavity and/or wall insulation and a well-serviced boiler as minimal requirements.

Space race

Lockdown certainly proved a testing time, especially for those with no or limited outdoor space. This led some people to sell their existing properties and look for more rural properties. Homes in close vicinity to parks and green areas are currently deemed in demand. Potential for extensions or conversions is also sought after by many in today’s housing market.

Lenders and deals

Buyers are always on the lookout for the best mortgage deals. Nationwide was the first big lender to increase fixed-rate deals, raising its two-year rate to 5.59%. Only a few months ago it offered a similar mortgage at 2.54%. That’s an increase of more than £880 per month for a family with a £500,000 mortgage.

I would expect other lenders to follow suit with the Bank of England likely to raise the base rate as high as 6% in 2023.  With this in mind, we should see house prices falling by up to 10 per cent next year to compensate for the soaring interest rates as we’ve seen nothing this high since the slump back in 2008.