Why The Housing Market Hasn't Crashed YET But Will Soon

The Uk Housing Market Update for July is here! With some important information you all need to know friends. Today we look at the quantitive easing effects, the ticking time bomb of mortgages, lenders pulling mortgage products along with why a property dip in prices still wont be the solution for prospective first time buyers.

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The UK housing market and the impending crash that cannot be avoided. Over the past nine months, there has been a debate surrounding the possibility of a housing market crash, with some suggesting that certain factors could prevent it. However, recent developments have made it clear that those hopes are unfounded. The Bank of England's decision to raise interest rates to five percent, the highest level since September 2008, has had a profound impact. In addition, the rising core inflation has spooked the markets, leading to a shift in the narrative and a prevailing sense of fear and panic.

One of the significant factors driving the housing market crash is the Bank of England's decision to increase interest rates to five percent. This rate, which many people never expected to see again after 15 years, has become the new normal. Furthermore, the anticipation is that interest rates may continue to rise even higher. The rise in interest rates is primarily driven by concerns about core inflation rather than general inflation. The cost of services and the demand for wage increases have led to an alarming increase in core inflation. These factors have prompted the Bank of England to take action, and further rate hikes are expected in the coming months. The cumulative effect of inflation over the past two years has already done significant damage to people's disposable incomes, making it increasingly challenging to afford mortgages.

Government's Stance on Bailing Out the Housing Market
There was a prevalent belief that the government would step in and save the day in the face of a housing market crash. However, recent statements from the government have made it clear that they have ruled out any bailout for the housing market.

Market Panic and Negative News Stories
The prevailing narrative in the market has shifted dramatically. Fear and panic have taken hold, resulting in a cascade of negative news stories about the state of the housing market. These stories, combined with the increasing annual house price drops, further contribute to the overall pessimistic sentiment. Even if house prices do not fall significantly from their current levels, the lag in statistical reporting will create an exaggerated perception of the annual growth gap between last year and this year.

The Inevitable Crash
When examining the Royal Institution of Chartered Surveyors (RICS) house price index, a clear pattern emerges. The current trajectory closely resembles the period leading up to the 2008 financial crisis. However, this time, the drop is likely to be more significant due to the inability to rely on low interest rates and quantitative easing as in the past. The consequences of the growth and unpaid pain of the last 15 years are now coming due. Interest rates are set to remain high, further exacerbating the damage already inflicted on the housing market. All these factors indicate that the UK housing market is in for a substantial correction, which will extend throughout 2023 and likely into 2024.