Will house prices fall this autumn?

As the autumn leaves start to fall, Kate Anderson takes a look at whether house prices are going the same way. Will there be an ‘autumn bounce’?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

'For Sale' sign outside of a terraced house in the UK

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The autumn leaves are starting to fall, and could it be that house prices are set to go the same way?

Much like the temperatures outside, there has been a definite cooling off in the housing market of late. But that doesn’t necessarily mean we are in for a long hard winter.

While we may be facing the end of the Stamp Duty holiday, there are still a lot of elements in play that can have an impact on the market. So, are we seeing the end of high house prices or not?

[top_pitch]

What’s happened so far in 2021?

The temperature has been rising in the housing market since the start of the year (yes, we are going to continue with the weather metaphors for a little bit longer).

The introduction of the Stamp Duty holiday meant that the average price of a house in the UK climbed to the heady heights of £265,000 in June 2021. However, the phasing out of the tax break has meant that house prices have started to level off.

While they were still 8% higher in July 2021 than in July 2020, they fell 13.1% compared to the previous month.

According to Rightmove, the national average asking price of a home fell by 0.3%, or around £1,000, during August.

So, as we move into autumn, can we expect to see more of the same?

Will house prices fall this autumn?

The big change this autumn is that Stamp Duty thresholds will return to normal on 1 October. This means that buyers will pay Stamp Duty on properties worth £125,001 or more.

While some may be concerned that this could lead to a big drop in house prices, other factors are still in place that should prevent prices from falling off a cliff edge.

Market sentiment still remains positive. In fact, buyer demand has remained strong, particularly for smaller properties. This has led some market experts to forecast an ‘autumn bounce’ in prices.

The supply of houses remains low. And if there is low supply and high demand, house prices inevitably go up.

There is also the fact that mortgage providers have relaxed their lending rules. There are a lot more low-rate mortgages available. And in some cases, lenders are considering borrowers’ overtime and bonuses as income again.

The number of 95% LTV mortgages available has also risen. In August, there were 49 lenders offering a 95% LTV mortgage.

[middle_pitch]

What does it look like for the rest of the year?

While we are unlikely to see house prices climb as high as they did in the middle of the year, it’s also unlikely that there will be a sudden drop.

A shortage in supply, high demand from first-time buyers and second steppers, and increased mortgage availability will all support the market. So house prices are likely to continue to move upwards, just not at the record pace we have seen so far this year.

If you are looking to buy a property in the next few months, then it’s always good to get an idea of the kind of mortgage you can afford. Our mortgage calculator helps you to see how much you could potentially borrow. It also breaks down what your monthly mortgage payments would be.

And if the end of the Stamp Duty holiday has you confused, you can use our handy Stamp Duty calculator to see how much you would have to pay on the property you’re considering.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

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