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The number of homes sold during September dropped by nearly forty percent as transaction levels reverted to normal following the significant increase caused by the Covid stamp duty holiday. However, industry experts believe the “house sales horror story” is not yet over.
According to the information HM Revenue and Customs (HMRC) provided, the total number of transactions registered in the United Kingdom in September was 103,930. This number was 37% lower compared to the same month in 2021, but it was nearly the same amount as in August.
According to the data, the number of transactions that have been finalized has been relatively constant over the last few months, and the aggregate figure is still greater than it was before the epidemic. However, the terrible mini-budget passed on September 23 prompted a surge in long-term borrowing costs supporting mortgage transactions. This caused the housing market to be chaotic, leading to higher mortgage rates.
After a slew of base rate rises by the Bank of England this year, home loans had already become more expensive. But due to the shock caused by the mini-budget, around 1,700 transactions were abandoned (which was largely reversed this week by the new chancellor, Jeremy Hunt). The costs of new mortgage packages have significantly increased.
According to statistics provided by Moneyfacts, the cost of the typical fixed-rate mortgage for two years hit a record high of 6.55% on Friday, making it the most it has been since the financial crisis of 2008. The typical rate for a mortgage for five years is 6.43%.
According to Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, the numbers for September were negatively affected by comparisons with those for September of the previous year, when the end of the stamp duty break caused a rush to complete deals. “The genuine home sales horror narrative will play out in the coming months,” she added. “The true house sales horror story will play out.”
According to Coles, most of the sales finalized in September were agreed upon around June. This was about when demand had begun to decrease somewhat due to increasing prices, convincing some to reconsider. Nevertheless, the average fixed rate for a two-year mortgage at the time was 3.61%, which meant that monthly payments “still seemed within the limits of affordability” for many purchasers, although mortgage rates were climbing.
“Sales agreed in the coming weeks are likely to look significantly uglier, as the pandemonium unleashed by the mini-budget put mortgages way out of reach for an awful lot of purchasers,” said Coles, who referred to the fact that the average two-year fixed rate is over three percentage points higher than the June number. “Sales agreed in the coming weeks are likely to look considerably uglier,” said Coles. “Sales agreed in the coming weeks are likely to seem far uglier because
“We may anticipate that these numbers will reach completion at the end of this year and into the start of 2023 when today’s rising feeling of dread will feed into the figures,”
Some prospective purchasers of homes who already have a mortgage may opt to go forward with the purchase of a house. In contrast, others may postpone the purchase for a time to observe the development of mortgage rates and housing prices over the next few months.
According to the chief executive officer of the property search website Onthemarket.com, Jason Tebb, the statistics from the website revealed that sentiment remained optimistic in September, with roughly 80 percent of sellers believing that they could close a transaction within the next three months.
“We wait to see what effect more political events and the nomination of a new prime minister will have on buyer and seller attitude,” he added. “We wait to see what impact further political events will have on buyer and seller mood.” Because purchasers’ purchasing power is decreasing due to rising interest rates and the general cost of living, new homes put on the market need to be priced more realistically.
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