Property and mortgage industry experts say ‘don’t panic’
Financial turmoil is causing panic amongst would-be homebuyers and movers alike but experts say the industry should hold fast.
The slew of negative financial headlines in the mainstream media are creating an air of panic but industry experts tell The Neg that now is not the time to panic.
With Bank of England Base Rate likely to increase the purchase market will undoubtedly shrink but current transaction chains shouldn’t be impacted.
Andrew Montlake (pictured), managing director of national mortgage broker Coreco, says: “I think the important line is let’s not panic.
“This is a pricing issue for lenders and a short term one rather than a long-term liquidity issue. Lenders are just trying to pause and wait and see what happens to markets. Markets always react and always calm down. The question is how long it will take.
“Lenders still want to lend and want to get back in the market. Contrary to some reports there is no evidence of offers being pulled and applications already in place are being honoured. What we need and the time for now is calm leadership and proper advice.”
There will always be occasions when people need to move and death, debt and divorce will always be our friends.”
Martin Stewart (pictured, left), director of broker London Money, agrees and adds: “There is undoubtedly a degree of volatility out there. How long that goes on for is anyone’s guess. But any base rate rise should not affect current chains and transactions as there will be a ‘deal or no deal’ debate ongoing that if people don’t buy now with the mortgage offer they have, it may be sometime before they get another chance.
“There will always be occasions when people need to move and death, debt and divorce will always be our friends in that respect.”
Careless
Phil Leiveley (pictured), sales manager at MB Associates, says his firm has not seen any lenders withdrawing mortgage offers that have previously been issued.
“I’ve seen some careless reporting from some media outlets who should know better over the last few days, which is naturally leading to panic amongst some of our clients.
“Yes, some lenders have made the decision to temporarily withdraw new products from the market (whilst many more remain very much in the market, albeit at higher rates than previously). They have made this decision simply to ensure they are not lending at a loss and will be back in the market soon.”
Ben Thompson (pictured), deputy chief executive of Mortgage Advice Bureau, says that were it not for the developments seen over the last week, the suggestion of a market crash would instantly be shrugged off.
He adds: “For this to happen, we would need demand for housing to fall off a cliff in a very big way. The most likely scenario as things look today, is that demand falls back from current levels and we do see a flattening off in house prices from now onwards, and probably single digit falls on and off for a few months.
FIRST-TIME BUYERS
“The positive from this, were this to happen, is that over time prices not rising will bring first-time buyers back into the market, helped a little by the recent stamp duty tax adjustment. But this depends on whether that, current policy, or even Government remains by then.
“The most important thing we can all do now is not to talk the market down, as one hopes this mess is sorted out, and we return quickly to a normal market, whatever that is these days.”
Savills‘ head of residential research Lucian Cook was less upbeat.
“Overall there is little doubt that we will see a combination of downward pressure on prices and lower transaction levels during 2023. However, as things stand, it is difficult to be confident of the trade-off between the two.”
Savills also expects different parts of the market to be affected to a different degrees.
“First-time buyers and buy-to-let landlords are likely to be the most affected. Across the rest of the market, more affluent buyers with lower debt requirements will be better able to ride things out.
“Over the longer term, prospects for the market will be dependent on how long it takes for inflation to be tamed and for the interest rate environment to normalise.”
RED FLAG
And proptech expert Andrew Stanton also urged caution.
“Market sentiment is going one way and the industry is putting on a brave front,” he says. “We’ve seen it all before but we haven’t seen this. We’ve had previous give aways but the new Chancellor isn’t instilling a great deal of confidence at the moment.
“We’ve been through an unusual set of circumstances marred by the death of Queen Elizabeth and then the mini-budget. We’ve had a long time of prices going up. There are a certain amount of traumas that the market can take but maybe this one too much.
“Let’s just hope this isn’t a red flag operation to divert us from what Putin is doing in Ukraine.”
Who’s panicking? The Stamp Duty Holiday hysteria was never going to hold – that was a false market. I started droning on about that in the Autumn of last year. I was concerned about it because zero attention was given to WHY supply and demand were so unbalanced. Cause and effect are much more telling than trotting out the phrase ‘supply and demand’ every time someone asks why prices are rising – or falling.
There’s now an adjustment in play, the market was always going to rebalance but what I didn’t appreciate last year was that there would be a war that would have the potential to cause a perfect storm. Look back at 1973 when Chancellor Anthony Barber mismanaged the economy, there was also an energy crisis and the Yom Kippur War – hopefully, you can see WHY it isn’t hard to draw comparisons between then and now. Prices as I recall collapsed by around 30%.
There are a couple of good lessons that arose from this. 1) Average prices were only around £4k. Look at what’s happened since. Long-term is the way to look at the property market. Tell that to your vendors and buyers 2) Plenty of excellent estate agents survived and emerged the other side wiser and stronger. Lots of box-shifters failed. 3) ‘Testing the market’ at a high price inevitably resulted in vendors not moving or selling at much less than they would have sold at had they priced to sell from the start.
I note the comment that lenders are there to lend. I remember writing those same words around the time of the 2008 Banking Crisis. History will show that that was a vain hope. They were a ruddy nightmare. Hopefully, the talks that have been going on between lenders and the government will help them not to become a problem this time but I’m not holding my breath.
Panic isn’t the same as preparing. Fail to prepare, prepare to fail.