23rd February 2023

BRIP - Housing Market

Housing Market Update 

The housing market is set to cool in 2023 as interest rates and inflation restricts peoples’ budgets and makes mortgages more expensive. The impact of Liz Truss’s infamous mini-budget, coupled with high inflation caused a surge in 2-year fixed mortgage rates to over 6% by October 2022. However, the new Sunak/Hunt Government has brought some respite to the market, with equivalent interest rates falling back to below 5% by the end of 2022. At the time of writing, the most competitive rates offered are approximately 4.6% for a two-year fixed rate and 4.3% for a 5-year fixed rate, assuming a 25% deposit. Whilst the Bank of England base rate is expected to rise towards 4.5% in 2023, this seems to be priced in to current mortgage rates. 


The overall impact on the housing market is difficult to quantify. In general, most commentators expect house prices on average to fall between 5% and 10% in 2023 before stabilising by the end of the year. Capital Economics predict a fall in house prices of 12% ‘peak to trough’, the largest predicted by those analysts we monitor. A fall of 12% would take us back to the equivalent value achieved in August 2021, some 13% higher than pre-lockdown levels. This gives perspective to the gains achieved since lockdown began, relative to falls we expect to see this year. In addition to this, the majority of analysts agree that the long-term prospects for the housing market are sound, with most analysts forecasting cumulative house price growth of between 3% - 12% over the next five years.


Whatever the impact on the wider housing market, our view is that the pricing of bespoke homes in popular locations with high demand, will be more resilient than the wider market. We have not seen any significant discounts across our own portfolio to date, and we are keeping this under constant review.