Predictions that the housing market would suffer in the current economic climate are ‘way wide of the mark’, according to a housebuilder.
Economists like Pantheon Macroeconomics have predicted house price falls in the next 12 months amidst rising mortgage rates and the cost-of-living crisis.
However Nicky Gordon, managing director of Cumbrian housebuilder Genesis Homes, said: “Widespread fear has been sparked by the doom and gloom predicted for consumers, particularly those buying and selling houses, through the increase of interest rates and the possibility of house prices falling significantly.
“The reality of the situation is that interest rates are at an acceptable level of between 4.5-5.5%, which is the circa 70-year average that we should expect, and we have basically been spoiled for a number of years with interest rates being basically zero. We enjoyed it but we need to realise it couldn’t last forever.
“The current rate is still relative for lending and affordability testing, meaning people can still afford a mortgage and house prices are not expected to fall as was predicted by some.
“In fact, these predictions were way wide of the mark and what we are seeing now is that lenders are reducing their interest rates to tempt buyers into the market, and some rates are expected to drop under 4% in 2023 which is really positive news.
“The government has set a target of 300,000 new homes to be built each year and we are going to fail miserably on that again in 2022, with the delays in building materials and labour shortages.
“So there is a real need for new housing, which will ultimately help with sustainability targets too, so we can see that there is no intention, particularly with the initiative of banks and mortgage lenders, for house prices to fall and we can only expect to see them increase in line with market expectations – albeit increase will be at more moderate than usual, pre-Covid levels.”
Gordon reckons base rate increases will only happen slowly, in response to Andrew Bailey’s comments.
He hit out at Liz Truss and Kwasi Kwarteng’s brief period at the top of the government for causing these market jitters.
Gordon added: “[It] was a complete shambles and that did nothing to reassure businesses in all sectors that the economy was in sound hands. The incompetence of the people in charge only increased panic that an economic problem was ahead.”
This week, Platform, owned by the Co-operative bank, became the first lender in more than a month to offer a five-year fixed-rate mortgage at under 5% when it introduced a 4.84% interest rate for borrowers.
So far online property agents Rightmove found that the average asking price of a house on the market has fallen by just 1.1% – which Gordon says is in line with usual pre-Covid falls in the run-up to Christmas.
However some economists reckon house price falls won’t kick in until next year.