On May 18, the Bank of England announced that interest rates had risen to 9%, the highest level since 1982.
With inflation rising, which is expected to peak at 10% by the end of the year, many homeowners are wondering how this will affect them.
There are growing fears that the UK is heading for another recession, with the rising cost of living hitting households hard.
Here’s everything you need to know about whether the housing market will collapse in 2022.
How much does it cost to buy a house in the UK?
Buying a home in the UK is challenging as the latest figures show that house prices in England rose by 9.9% in the year to March 2022.
The average house price in England is £297,534, putting many first-time buyers out of the market even if they have a stable income.
Low interest rates have also made it cheaper to borrow for a mortgage.
After the pandemic, the demand for houses increased sharply.
Halifax described this as a “space race” that saw people who lived in the city move to the country.
Will the housing market collapse in 2022?
There is increasing speculation that the real estate market could collapse in 2022.
High interest rates combined with the cost of living crisis have put pressure on households as they try to afford rising energy and fuel costs.
The Bank of England has forecast UK inflation to hit 10% by the end of 2022.
Despite this, house prices have risen steadily for 10 months, making this the longest steady rise in prices in six years.
Low mortgage rates are still driving the market, but there are concerns that rising inflation will raise mortgage rates and discourage buyers.
Lloyds Banking Group has forecast that house prices will remain at their current market value but growth will remain at around 1% in 2022.
If Britain Goes Into Recession, Will House Prices Fall?
When a country enters a recession, house prices will inevitably fall.
With the higher cost of living and the risk of unemployment, many prospective buyers won’t be able to buy a home or even start planning.
Recessions also bring a lot of uncertainty, meaning banks are often reluctant to lend.
According to the Office for National Statistics (ONS), the average house price in the UK fell by 15% during the 2008 housing market crash.
What happened during the real estate crisis of 2008?
In 2008 the UK went into recession and the property market collapsed.
The recession was caused in part by banks lending mortgages to people who couldn’t pay them.
Overnight banks went bust and big names like the Royal Bank of Scotland had to be bailed out by taxpayers.
Between 2008 and 2009 the average house price in the UK fell by 15%.
Many homeowners are left with negative equity, meaning the value you paid for your property is less than its worth.
https://www.nationalworld.com/lifestyle/money/will-the-housing-market-crash-in-2022-uk-recession-property-prices-go-down-fall-3700967 UK recession: will the property market collapse in 2022?