The UK economy is still facing long-lasting consequences that have played a crucial role in the direction of the property market. In the recent months, supply chain disruptions, high energy prices and worker shortages have all contributed to consumer price rises, with inflation currently at the highest it’s been in a decade. The same goes for house prices, where inflation could significantly impact mortgage rates for any potential homebuyers.
As you’ve probably seen in the news, there has been an abundance of articles that discuss inflation and interest rates; hence, we have broken down the key points about the topic that will help you better understand what this means for the future of the property market.
What is inflation?
Simply put, inflation is the increase in the price of goods and services. Currently, you can see this in rising energy prices, petrol prices and even through the cost of food and drinks in supermarkets. On top of that, you can see this through increasing wages for jobs that are currently facing shortages – most prominently in the skilled and transport sectors.
This has caused a strain for home buyers who may be looking to purchase a property. House prices are already at an all-time high, and prices of materials set to continue rising, it is likely that buyers will end up paying even more than the high prices that are already commonplace.
Why has inflation gone up?
The combination of the pandemic and Brexit has caused an untimely rise in inflation, with the Office for National Statistics finding that it rose by 5.1% in November alone. This is the highest it’s been since September 2011, and at more than double the Bank of England’s target of 2%.
There are 2 main causes for inflation:
Firstly, inflation can come down to the lack of resources, which has been made prevalent through Brexit and the rising price of input goods and services. In turn, this places significant pressure on the prices of goods and services, consequently resulting in inflation.
Secondly, inflation can be a result of demand, whereby the demand of goods and services exceeds the production, with short supply adding pressure to prices, leading to a rise in inflation. We can already see how this has impacted the housing market as house prices continue to steadily rise as buyers race to bag that dream country cottage or semi-detached house of their dreams.
What does the rise in interest mean for the property market?
If inflation continues to increase, it means that prices of goods and services have continued to rise; therefore, increased inflation is likely to lead to a rise of interest rates, governed by the Bank of England in an attempt to combat this issue. An increase in interest often results in a subsequent rise in loan and mortgage prices, meaning that buyers looking to purchase a home could rush to approve their mortgages as soon as possible. Simply put, it means that it could get a whole lot harder and more expensive for those planning on buying a house next year.
Moveable’s research has found that 12% (1,900,000) of Brits rushed their property transaction due to the Stamp Duty Holiday, while 11% (2,300,000) of Brits overpaid by thousands during a house move in the last year. With a potential increase in mortgage prices, it is more important than ever to ensure that buyers understand the market in which they are purchasing in, and doing all that they can to save as much as possible.
How can Moveable help?
Moveable is a free and easy-to-use service that helps you with the complicated process of buying a home. Moveable ensures that people have the ability to research the best partners and platforms to ensure that people don’t lose money due to the lack of knowledge. It has everything you need including expert guides, price-comparison and timesaving tools – everything you need in one convenient package that helps you with your move!
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