Mortgage experts react to Rightmove's latest HPI

Support from brokers needed now 'more than ever'

Mortgage experts react to Rightmove's latest HPI

Mortgage industry experts have reacted to Rightmove’s latest House Price Index (HPI), showing that homebuyer demand has fallen by 15% in the last two weeks compared to the same period last year.

The property portal revealed that average property prices rose by 0.9% (the equivalent of £3,398) during this period to a new record of £371,158, adding that the small increase represented “a softening” from the five-year average rise in October of 1.2%.

Rightmove said the shortage of properties for sale had continued to underpin prices. It also noted that the record in asking prices seemed “surprising” considering the market turmoil that followed the government’s mini budget last month but stressed that it would take time for any impact to filter through to house prices.

For now, there was “little sign” of downwards price pressure on existing properties for sale, with the number of reductions up 2% on last month to 23% of all properties reduced, adding that the level was still much lower than the pre-pandemic five-year average of 32%.

Rightmove said it was “very likely” that asking prices would drop in November and December “as they normally do” but added that it would be important to distinguish seasonal price changes from market changes caused by other factors.

Read more: Property industry reacts to UK government's U-turn on fiscal plans

However, despite the soaring rates and September’s notorious mini budget, Rightmove said only 3.1% of sales agreed fell through in the two weeks since that event, which was in line with the 3% over the same two weeks during 2019.

Buyer demand was also still 20% higher compared to the same period in 2019, before COVID.

Vikki Jefferies, proposition director at PRIMIS, said the data showed that the housing market had so far been able to weather ongoing economic issues, despite the rate of house price growth slowing.

“Now, more than ever, support from brokers will be critical to customers in need of guidance in the face of rising mortgage rates,” she said, adding that brokers needed to offer tailored advice to ensure that homeowners were aware of the options available to them due to “increasingly complex personal financial situations”.

Head of sales at Standard Life Home Finance, Kay Westgarth, said that despite an increasingly complex market, it was “reassuring” to see that house prices remained “relatively robust”. 

Nonetheless, she said it was “clear” house price growth would be impacted, citing five consecutive interest rate changes and the turmoil following the mini budget.

She also echoed Jefferies views that advisers could add real value to a transaction by helping clients understand and explore all the options available to them. 

“The long-term drivers for the later life lending sector and the UK residential property market are good, so the focus needs to be on supporting people during the current turmoil,” she concluded.

Read more: Rate of house price growth “surprising”

Simon McCulloch, chief commercial and growth officer at Smoove, was more forthright, saying there was “a clear softening in house prices after the government’s mini budget last month and the domino effect it has caused”.

He, however, added that the lack of supply of homes for sale was likely to continue to underpin prices into the new year.

Kate Davies, executive director at IMLA, stressed that Rightmove was reporting “on a month of two very different halves” – pre-and post the ‘fiscal event’ that had caused severe damage to financial markets.

She said: “A number of commentators have predicted significant falls in house prices – perhaps as much as 20% - while others take a longer-term view, pointing out that prices have been rising ahead of wages and inflation for a considerable period, such that much of the housing stock is currently over-valued.  Allowing it to settle back to something closer to ‘normal’ may be a good thing – although it will need to happen gradually in order to avoid further stagnation in sales and problems for existing homeowners who may wish to sell and find themselves in negative equity.  The imbalance between supply and demand will continue to support prices – and long-term data shows us that property remains a reliable long-term investment.”

Davies also commented on the issue of housing stock, claiming September’s ill-fated mini budget would have longer-term repercussions for the mortgage market.

She said: “The fallout from the Truss Government’s disastrous ‘fiscal event’ is likely to have continued repercussions for the mortgage market for months to come – and this will hit first-time buyers particularly hard, as loans become more expensive. 

“At the same time, the rising cost-of-living will make it harder to save for a deposit – putting the goal of homeownership way out of scope for many in the foreseeable future. The withdrawal of the Help to Buy scheme will mean that there is no significant Government support for first-time buyers: alternative schemes are being developed but these cannot yet deliver the volume needed to replace HTB.

“Lenders will re-price their products and will continue to support borrowers – but the figures are likely to look quite different for some time to come – the era of sub-1% mortgages has gone.”

Richard Pike, Phoebus Software’s chief sales and marketing officer, said the data highlighted the continuing problem of supply and demand. 

“While the demand is there and the changes to stamp duty remain, along with an imminent increase in interest rates, pressure is almost certainly going to be on lenders,” he said. “The reduction in the number of mortgage products available since the mini budget is a cause for concern, especially for first-time buyers.  Now is the time for lender innovation to ensure that the continued demand can be catered for.

“It is still early in the peace but rising interest rates and high inflation have yet to quell borrower appetite. How long that will be the case remains to be seen, but for now we all need to keep adapting to the ever-changing landscape. The interest rate decision later this month will be a big barometer of what the Bank of England thinks of this U-turn.”