• Skip to primary navigation
  • Skip to main content
  • Skip to footer
Call us on 020 8798 0184
The Mortgage Network

The Mortgage Network

Residential & Buy-to-Let Mortgages

  • About us
    • Client Testimonials
    • Google Reviews
  • Mortgages
    • First-time Buyer
    • Moving Home
    • Remortgage
    • Buy to Let
    • Surveyors
    • Solicitors
    • Jargon Buster
  • Insurance
    • Life
    • Critical Illness
    • Income Protection
  • Refer a Friend
  • News and Articles
  • Contact

Is The UK Housing Market In A Bubble?

July 3, 2021 by Taryn Johnston Filed Under: Mortgage, Mortgages

mortgage advice radlett

The Stamp Duty holiday has arguably been the housing-market equivalent of the January sales.  It got people out and spending at a time when they might otherwise have stayed at home and saved.  Like the January sales, however, it must come to an end (barring any major surprises).  So what will happen to the housing market then?

The case for more growth

The Stamp Duty holiday benefitted onward-movers (and investors).  It didn’t really benefit first-time buyers.  In fact, it arguably disadvantaged them.  First-time buyers already benefited from a Stamp Duty discount, albeit a capped one.  The Stamp Duty holiday put them (back) on an even playing field with people who were likely to be on a stronger financial footing than them.

For example, onward-movers would have had the opportunity to build up equity in their home.  Investors, meanwhile, by definition, are people who have money they can set aside for the purpose of making more money.  It is, therefore, possible that a lot of the house-price growth seen over the last year or so has actually been an indirect result of the Stamp Duty holiday.

In other words, the Stamp Duty holiday may have encouraged people to move on sooner rather than later.  It might also have encouraged them to look at larger properties.  For example, some people might have wanted more space for children (indoors and outdoors).  Some may have wanted working-from-home space.  Some may even have wanted both. 

Further growth may, therefore, come from first-time buyers returning to the market once their Stamp Duty advantage returns.  If it does, it will be interesting to see what type of properties they buy and where.

The case for flatlining

There are two good reasons for thinking that house prices might flatline.  The first is that there has been so much activity in the housing market since last July.  It’s therefore entirely reasonable to wonder how much energy there can be left in the housing market.  Quite simply, it may have run out of steam naturally and hence may need some time to cool off.

The second is that the housing market can only grow if people can afford to pay higher prices for homes.  This depends on their income and, one way or another, this generally depends on the state of the economy.  Even people on guaranteed fixed incomes (e.g. pensioners) are impacted by the state of the economy as it influences prices and hence their disposable income.

Technically, the UK economy is growing.  Realistically, however, the growth could be more accurately described as a reboot.  In other words, the UK economy has spent over a year in various stages of lockdown.  It’s now getting back to where it was rather than forging ahead. 

This begs the question of how much further growth, if any, the housing market can sustain before it becomes unaffordable.  Help-to-Buy schemes may be a consideration here.  That said, these ultimately depend on the government’s ability to finance them.  This ultimately depends on the state of the economy (and hence tax revenues).

The case for house-price falls

What goes up doesn’t necessarily have to come down.  If it’s to stay up, however, it needs something to support it.  In the case of the housing market that is often mortgage payments. 

If homeowners cannot afford their mortgage payments, then, one way or another, their home will be sold.  If buyers cannot afford mortgage payments then they cannot buy.  This means that either homes go unsold or sellers lower their prices until buyers can afford them.  In the real world, it may mean a combination of both.

There is a difference between house-price falls and a market crash.  House-price falls can be a case of a slow slide to a gentle landing and then a climb back up again.  They do not have to be sudden drops.  Either way, however, house prices can and do fall if they rise to unsustainable levels.

Contact us today for more information or to get mortgage advice.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage

Footer

The Mortgage Network’s role is to provide you with professional mortgage advice. We are dedicated to the Buy to Let and Residential mortgage market – helping you find the best mortgage solution for your needs.

The mortgage market has never been so complicated. Our expert mortgage advisers will guide you on your best options and find you a solution that is specifically right for your needs.

Quick Links

  • Client Login
  • About us
  • Mortgages
  • Insurance
  • News and Articles

News and articles

  • How To Keep Your Tax Bill To A Minimum
  • How Much Is Your Home Worth?
  • Discussing downsizing
  • Is the internet the right place for advice?
  • The Government’s Vision For The Housing Sector

Contact us

Send us a message

Call us: 020 8798 0184

  • Our Data Privacy Notice
  • Sesame Data Privacy Notice
  • Marketing Options

Your property may be repossessed if you do not keep up repayments on your mortgage.

The Mortgage Network is a trading name of Oakfields (Marcus) Ltd which is an appointed representative of Sesame Ltd
which is authorised and regulated by the Financial Conduct Authority.

The FCA does not regulate solicitors, surveyors and some forms of Buy to Let mortgages.

For Residential and Buy to Let mortgages, our typical advice fee is £395 and we may receive commission from the lender.

We act as introducers for investment products.

Registered Office: 3 Permain Close, Shenley, Herts WD7 9DR | Registered in England: 2903687

Copyright © 2022 | The Mortgage Network is a trading style of Oakfields (Marcus) Ltd Website by Liquid Moon