price growth softens but fears of a crash unfounded

As the stamp duty holiday finally drew to a close at the end of September, following an extension from the previous deadline and three months of tapering, there were fears that house prices would crash as transactions fell off a cliff. But while there is evidence of a gradual slowdown, fears of a crash were unfounded as it seems there is still room for some growth in the market.

what the indices show

Nationwide reported a slight dip in house-price growth during September to 10 per cent, compared with 11 per cent in August, suggesting that those buyers who couldn’t complete before the end of the month and take advantage of the tapered stamp duty holiday were perhaps pulling back from the market. However, before anyone takes this as evidence that property price growth is on the wane, the UK’s biggest building society also pointed out that house prices remain around 13 per cent higher than before the pandemic began in early 2020, putting the ‘slowdown’ into perspective.

Of course, these national average prices mask significant regional differences, with some regions seeing stronger increases than others, so one shouldn’t get too hung up on the numbers. For example, house prices in Wales rose by 15.3 per cent year-on-year, compared with England (8.5 per cent in the third quarter of the year). Meanwhile, in London, annual growth slowed to 4.2 per cent in Q3 compared with 7.3 per cent in Q2. However, even though London has not seen the soaring growth witnessed in other regions the average property price in the capital is still significantly higher than elsewhere. Those areas where price growth has been stronger have historically been at a lower pricing point than other parts of the country, so a rise is more visible and significant.

Halifax’s house price index reaffirmed the picture painted by Nationwide, with the lender pointing out that house prices are at levels surpassing those seen during the 2007 boom. Clearly, the continued desire of buyers to move and find more space remains at the top of the agenda, even without a stamp duty holiday to tempt them into a purchase.

rising interest rates?

However, it is not only about the desire for more space – while interest rates remain low, buyers are taking advantage of mortgages pegged at below 1 per cent. The Bank of England Money & Credit data shows that buyers are keen to take advantage of the low interest rate environment. Put simply, we’ve never had it so good when it comes to mortgage rates, which is further demonstrated in the remortgage market where borrowers are prepared to pay exit penalties in order to get out of their existing deal and onto one of the cheaper fixes now available.

Stretching yourself to get on the housing ladder is more affordable than in the past, although it’s worth remembering that rates won’t necessarily stay low forever. Indeed, Bank of England governor Andrew Bailey has warned that interest rates may need to go up next year in order to curb inflation on the back of rising fuel prices and the prospect of higher energy costs. With inflation at 3.2 per cent and with inflationary pressures getting worse, rather than improving, it is not inconceivable that inflation could reach double the Bank of England’s 2 per cent target by the end of the year.

lack of supply – stamp duty reform the answer?

Finally, the other issue is the lack of supply, with demand from buyers far outstripping homes for sale, causing property prices to rise accordingly. More supply is desperately needed in order to keep property prices in check so that they don’t become beyond the means of the average buyer.

At MT Finance, we have been suggesting for a while that one way of doing this is to cut or remove stamp duty for downsizers, encouraging them to move out of family homes into smaller properties, and freeing those homes up for those moving up the ladder. The stamp duty holiday has been such a success in boosting the housing market and wider economy as a whole, that it is worth looking at introducing some form of it in a targeted way. This will ensure that those who want to move to smaller properties aren’t penalised with a heavy tax on moving, which puts them off doing so altogether.

how MT Finance can help

Even though the stamp duty holiday has come to an end, the upwards trajectory of the housing market is set to continue for the foreseeable future, particularly as borrowing remains cheap. There are certainly some excellent deals available as lenders compete for business.

Of course, it’s not always just about the rate you pay. How quickly you secure the finance you need can be just as important, if not more so. With the housing market so busy and more buyers than sellers, if you are not a cash buyer, getting your finance arranged fast enough to beat the competition can be a challenge. This is where bridging finance can help as a loan can be agreed within hours.

At MT Finance, we can lend from £50,000 up to £10m at up to 70 per cent loan-to-value with terms from 1 to 24 months to those borrowers who need to move quickly. Get in touch for more information on or 0203 051 2331.

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