Chancellor Kwasi Kwarteng’s ‘mini-budget’ was announced on 23 September, and it included cuts to different types of taxes, including a reduction of Stamp Duty Land Tax (SDLT) in England and Northern Ireland.
The day before, the Bank of England raised interest rates for the seventh consecutive time, to 2.25%, the highest since 2008.
Since then, there has been lots of news about how these changes might impact the housing market.
So, because we’re able to see any changes in home-mover behaviour in real time, we’ve taken a closer look to find out what’s changed in the past fortnight.
What was happening before the mini-budget announcement?
The coronavirus pandemic and several lockdown periods had a significant impact on the housing market. We saw demand from people looking to move hugely outweigh the number of homes available to buy, which has continued to push average asking prices to an all-time high.
Throughout 2022, we’ve seen these huge levels of demand start to cool, which is partly due to more homes coming onto the market. And more recently, we’ve been starting to see glimpses of the housing market steadying back to the levels of demand we saw pre-Covid, in 2019.
What’s happened to mortgage rates?
Before the mini-budget, mortgage rates had already been increasing throughout the year. But these rates have been rising further in the past fortnight because the tax cuts announced in the mini-budget were unexpected. And when unexpected things happen in financial markets, they’re likely to have a direct impact.
There’s been lots of speculation about how these cuts might impact the UK’s finances. It’s widely believed that the Bank of England may need to raise interest rates faster and higher than previously forecasted. This has impacted the underlying costs of fixed-rate mortgages, and it’s also why some lenders have repriced deals.
Are house sales falling through?
In times of economic change or uncertainty, it’s possible that people will reassess whether big purchases they’d planned on making still make sense for them. So if you’re currently in a property chain and waiting to move, you might be concerned about what’s going on with the moving plans of other people in the chain.
But in the past two weeks the number of sales falling through have remained at an almost identical level to the more ‘normal’ housing market of 2019. And for the most part, people aren’t pulling out of sales that have already been agreed.
Are people still putting their homes up for sale?
There’s also been lots of speculation about house prices and what might happen. And there was a chance we could’ve seen more people put their moving plans on hold, opting to wait and see what happens.
But compared to the two weeks before the mini-budget announcement, we’ve actually seen a slight increase (4%) in the number of new properties being listed for sale. This is positive news for those looking to move, as there’s a wider choice of potential homes to buy, and it should help to slow the rate of house price growth.
Are home-sellers reducing asking prices?
In the past two weeks, we’ve seen a very small increase (1%) in asking price reductions, compared to the previous fortnight.
The number of homes for sale with price reductions – currently 23% – is significantly lower than the average we saw during the five years before the pandemic, which was 32%.
In a poll of estate agents this week, more than half (54%) said new sellers, or those who have put their homes on the market since the mini-budget, would now be more open to pricing their homes realistically, or would be willing to consider lower offers.
If you’re thinking of selling your home, one of the most important things you can do to make sure you find a buyer is to price it competitively from the time it goes onto the market. This means it’s less likely you’ll need to make a price reduction further down the line.
The best way to get an accurate valuation is to ask a local estate agent. You can find local estate agents and arrange a free property valuation here.
Are people still looking to move home?
We’ve seen the same number of people looking at homes for sale on Rightmove in the two weeks since the mini-budget. However, we’ve seen a 12% drop in the number of people enquiring to view properties, compared to the two weeks before the mini-budget.
This may be because home-buyers are reassessing exactly what they can afford, as rising interest rates have led to an increase in the average mortgage rates that are available.
Some home-movers may be considering whether they’ll need to make changes to their budget, or might now consider looking for a home in a more affordable location.
There’s been no change in the number of sales agreed when comparing the two weeks before the mini-budget, with the two-weeks after. Which means for those that are able to do so, home moves are still going ahead.
What will happen on 31 October and why is it so important?
At the end of the month, the government is due to publish a detailed fiscal plan, along with forecasts from the Office for Budget Responsibility. These finer details will be really important, as the plan will outline how the government plans to fund the package of tax cuts unveiled as part of the mini-budget.
It’s hoped that some of the uncertainty in the financial markets will start to settle as more details of the government’s “medium term fiscal plan” are revealed.
