The housing market is still reeling from Liz Truss and Kwasi Kwarteng’s botched budget and the legacy of the pair’s “disastrous” set of measures underlines the importance of Jeremy Hunt getting things right later this month.
The effect of their mini-Budget was instant and severe – it sent a shockwave through the market that led to fall throughs and thousands of mortgage products being pulled before returning to the marketplace significantly more expensive than before.
The only reason so many other sales held firm was because lenders honoured rates for purchases where a mortgage offer was already issued. That kept the wolf from the door for the Autumn and early winter period.
We are still feeling the effects. Rates began to fall but have plateaued and long-term borrowing shows signs of soon becoming more expensive again.
The start of the year has been better than expected but as the affordability crunch deepens, we will – for the most part thanks to the mini-Budget – see sellers desperate to offload, reducing prices to entice a savvy buyer. That’s why Mr Hunt’s March Budget is crucial to preserve the faith in our housing market.
Gentle, targeted intervention is needed to increase supply and help bridge the affordability gap faced by buyers, through no fault of their own.
The legacy of the disastrous Truss/Kwarteng Budget lives on and Jeremy Hunt must strive not to make the same mistakes.
The big difference now is that there is an affordability crunch. Millions of buyers are still keen to get a place of their own, but can’t afford to borrow as much. So they have a choice, make a lower offer or buy something inferior for less.
Right now we are seeing a blend of both scenarios happening. This is limiting the price reductions owners are taking. What’s more, the letting market is very strong so some, unable to get their price, are renting instead. Buyers know this and that makes them keener to buy.
Jonathan Rolande is from the National Association of Property Buyers (NAPB)
