Millions pay over the odds in property rush as selling season returns

Property market must check back in with reality soon though, experts warn

With the number of mortgages shrinking fast and rising interest rates on those that remain, the expected check-in with the real world has been swept aside by those who anticipate a ‘frenzied’ selling season (Getty)

Welcome to March, the busiest month in the property calendar.

Rightmove reckons the average property is on the market for just 57 days before it goes under offer this month. And this year, despite warnings (for months now) that the housing market would soon come back down to earth, it hasn’t happened. Yet.

The latest figures out this week show house prices rose at their fastest rate since the middle of 2007, before the financial crisis kicked in. Up almost 11 per cent in the last year, the Halifax House Price Index showed the average property rose by more than £27,200 - the biggest annual gain in the record’s 39-year history. The average property will set you back £278,123.

Now, with the number of mortgages shrinking fast and rising interest rates on those that remain, the much-discussed lull, the expected check-in with the real world has been swept aside by those who anticipate a ‘frenzied’ selling season.

But this has all come at the same time as plunging consumer confidence. So what’s going on?

First, there are concerns over lending.

March began with a significant drop in the number of mortgages available – down almost 520 products since the start of February. That’s the largest contraction since the early days of the pandemic, when everyone panicked over how and if the UK economy would come through Covid.

Not only have lenders cut their ranges though, they’ve also increased rates following two base rate rises, Moneyfacts reported this week.

The majority of homeowners are now on fixed rate deals, in a bid to keep monthly costs consistent and shield themselves from the rate rises inflicted on those still dealing with trackers (typically up by 0.33 per cent month-on-month).

That said, the average two-year fixed rate is up for the fifth consecutive month to 2.65 per cent, while a typical five-year fixed rate loan now comes in at 2.88 per cent.

Slide off the end of those fixed periods and you’ll now face standard variable rates of 4.61 per cent on average.

But you’ll still have to be quick, even if you want one of those more expensive mortgages, warns Eleanor Williams, finance specialist at Moneyfacts. They are now only available for an average of 28 days before they’re withdrawn.

“While factors beyond lenders’ control are uncertain, as the cost of living crisis continues and economic conditions are volatile, to mitigate the risk of default, it could be that providers may tighten their lending belts even further moving forwards,” she says.

“Borrowers looking to get onto the property ladder or to remortgage may therefore be wise to seek advice to ensure they are abreast of the changing market and to move forwards with securing the most suitable deal for them.”

Mortgages aren’t the only reason time constraints are costing movers money, though, especially in this hyped-up market. Property platform Moveable recently found that 2.3 million Brits have overpaid by thousands - from conveyancing costs to removals - because they either don’t understand or have rushed the home-moving process.

Meanwhile, house prices continue to rise. If only for now.

House prices surged to another record high in February, rising faster than any other time since the financial crisis. Keen buyers and a shortage of properties mean prices are up an incredible £27,215 in a year.

“Eventually buyers will have to face the fact that life is getting more expensive and unpredictable, and we’ll see these record price rises slow significantly,” Sarah Coles, senior personal finance analyst for Hargreaves Lansdown believes.

“The imbalance in the market plays a major role here. The RICS survey for January showed that more buyers flocked to the market at the start of this year, with their numbers growing for the fifth consecutive month. Meanwhile, the number of properties going up for sale shrank again – for the 10^th month in a row. This is pushing prices higher, despite everything else going on in the world.”

But reality will filter through eventually, with energy bills, the cost of filling up, rising food prices and the rest making its presence felt.

“Inflation at 5.5 per cent feels bad enough, and it’s going to go higher,” said Coles.

“Buyers will start to think twice about whether this is the time to be stretching their finances to afford a bigger property. And if higher inflation feeds into interest rate rises, it will mean a double-whammy for the finances of potential buyers.”

The uncertainty created by Russia’s invasion of Ukraine shouldn’t be underestimated either. It will start to weigh on sentiment, which could put more buyers off.

With property sales taking months to complete and to feed through to survey data, she says: “the growing worries potential buyers are feeling today will feed through into house prices in April and May, and prices will start to rise more slowly as we go through 2022.”