The UK property market has been in turmoil over the past couple of years, seeing significant changes for both mortgage rates and housing prices. But what exactly has been happening and what does it all mean for investors? We’ll endeavour to bring some clarity to this complex topic below.

In this article, we’ll explore what’s been happening in the UK housing market recently.

What’s been happening with mortgage rates?

Together with broader interest rates, mortgage rates have generally been increasing over the past couple of years. This is because inflation, the measure of how much the prices of goods and services are increasing, has been rising recently. The Bank of England increases the bank rate to try to calm down inflation, having a knock on effect on mortgage rates.

Yet inflation has fallen significantly in the second half of 2023, giving banks more confidence to start providing mortgages at lower rates again. When a few banks start to cut their mortgage rates, people are more likely to choose to borrow money from them. This causes other lenders to start reducing their rates as well, so that they can continue to attract more customers in a competitive market.

What’s been happening to house prices?

Higher mortgage rates increase the overall costs of buying property, so they tend to slow down the housing market. Fewer people are able to afford a mortgage, together with the other important costs of buying a house, and so there’s less property demand as a result. This can result in house prices stagnating or even decreasing.

Yet when mortgage rates start to become cheaper, it creates the opposite effect on house prices. More people are willing to buy property, which means more demand and higher prices.

Is now a good time to invest in a house?

The ideal time to invest in a house is when mortgage rates and house prices both reach a low point. When borrowing costs are down and house prices are increasing is a close second. But you should also bear in mind that it’s highly unlikely to time the market perfectly at the lowest interest rates and lowest house prices.

It’s better that you make your decision based on more reliable factors, such as what you can afford or whether you need to diversify your portfolio. Whichever way you’re leaning, it’s worth considering getting advice from experts to help you make your decision. A financial adviser can help you decide what the best next move is for you, no matter what’s currently happening in the housing market.