In the latter stages of 2022, there are a lot of pressures affecting the housing market, including increased mortgage rates, general cost of living increases putting pressure on first-time buyers, and other market turmoil that tends to affect house buyers and house prices.
Yet at the same time, an estate agent in Leicester is likely to report an increase in prices compared to the past few years, and on a national level, the average price of properties coming to market has never been higher.
After a couple of months of falls and lower increases, Rightmove’s monthly House Price Index reached a record high of £371,000 for an average property.
So that naturally leads to the question of what ultimately affects house prices as a whole, as opposed to the small changes a seller can make to increase the value of their home.
Interest Rates Vs Renting
Typically one of the deciding factors between buying a house or choosing to rent long-term is the interest rates on mortgage repayments, sometimes known as the “mortgage rate”
This is the percentage rate added to mortgage repayments and the higher this rate is, the more a lender will ultimately pay on their mortgage when they pay it off.
This affects monthly repayments, and if the average mortgage repayment exceeded rental payments, people are less capable of buying rather than continuing to rent.
Often it takes up to six months for the effect of rising interest rates to affect house sales, because many buyers lock in their rate up to six months in advance.
Supply Vs Demand
The core principle of any business is based on the relationship between supply and demand.
If there are a lot of homes but little demand for them, as was seen in the mid-2000s at the end of a property boom, house prices go down, but if there are few houses for sale but many people want to move, prices naturally rise.
At present, supplies of homes have remained low for several years, which has kept prices high.
