What is happening to house prices in 2022?

The UK economy is undergoing a period of rapid inflation. Prices are currently rising by 9% a year, the highest rate for 40 years. And The Bank of England has warned inflation could increase further to 10% by the end of 2022.

Inflation is being caused by a number of factors all occurring in parallel. Energy, fuel and food bills are all rising, and the situation is being made worse by the conflict in the Ukraine.

But what does this mean for house prices? Are they likely to go up or down? And what should you do if you are thinking of either buying or selling a home? When is a good time to do this?

In this article we take a look at these difficult issues. We can’t promise any easy answers: in fact to do that you would need the equivalent of a crystal ball! But we can suggest some of the things you need to consider in order to make a good decision for your circumstances.

So we will cover:

  • What is the forecast for house prices for the rest of the year?

  • If you are a first time buyer, when is a good time to buy?

  • If you want to move to a more expensive home, when is a good time to buy and sell?

  • If you want to release equity in your home, when is a good time to do this?

What is the forecast for house prices for the rest of the year?

According to The Halifax Building Society, average house prices in the UK hit a fresh record in April, rising 1.1% in April compared with March. This follows 10 months of continuous growth during which prices have risen by 10.8%. The average price of a home in the UK is now £286,079.

However, rising inflation is likely to impact house prices at some stage during 2022. Interest rates are rising, making mortgages more expensive. Gradually less people will be able to afford mortgages, so there is likely to be a reduction in demand for homes which could slow down the growth in prices.

But what does this mean if you are hoping to buy or sell a home over the next few months?

Let’s take a look.

If you are a first time buyer, when is a good time to buy?

In the March 2021 Budget, Chancellor Rishi Sunak announced the return of the 95% mortgage. This is significant because it means that a buyer will only need to pay 5% of the cost of their home as a deposit, but they can use a mortgage (subject to approval) to make up the rest of the cost. This compares with mortgage deposits of 10% or even 15% being required previously.

However, the 95% mortgages are only guaranteed to run until the end of 2022. It is possible that either further measures could be announced by the government to extend them, or that some lenders may choose to continue to offer them, but this remains to be seen.

So from a mortgage point of view, if you are planning to buy your first home, now could be a good time to do that. Even though prices are still rising at the moment, it would seem unlikely that they will then drop significantly by the end of 2022. If you wait to see what happens, prices are likely to keep rising for now, and you could even lose the chance of a 95% mortgage. 

If you want to move to a bigger home, when is a good time to buy and sell?

You may be at the stage of life where you already own a home but need a bigger one, perhaps for a growing family. So it’s a case of trying to get the right balance between getting the highest price for your current home and the lowest price on your new home.

Much depends on the kinds of homes you are buying and selling. Currently there is a lot of demand for larger, family homes, and less demand for smaller properties such as flats. According to The Halifax, prices for detached and semi-detached properties have risen by over 12% over the last year, compared with 7.1% for flats.

So if you are selling a smaller property to buy a bigger one, it could make sense to move sooner rather than later, as the purchase price of your larger home is likely to rise at a faster rate than the selling price of your smaller one.

If you want to release equity in your home, when is a good time to do this?

Another scenario is that you are currently a homeowner but want to sell your home to release some of the equity in it. Once you have sold your home you could either buy something cheaper or move to a rented property. This could enable you to use some or all of the equity from your current home to sort out your finances and/or go for some kind of major lifestyle change.

If this is the case, then it really depends on your circumstances as to the best time to do this. As we saw earlier, prices have been rising, so hopefully you will have made some money on your home. If you need money fast, then now is as good a time as any to sell. But if you have the option of waiting a couple of months more, it may be worth doing that as prices may rise further.

We hope that whatever your current home situation, this article has given you some helpful things to think about if you are considering buying or selling in the near future.

And if you end up facing a financial shortfall at any stage, remember Minty offers low apr loans  that may be able to help.

For more financial and lifestyle tips from Minty Loans visit us here again soon.