2022 UK housing market predictions

It could be another interesting year in housing, as we take a look at UK housing market predictions for 2022. Last year, the Stamp Duty holiday, flexible working, and historically low interest rates fuelled a home-buying frenzy. Naturally, house hunters responded by taking advantage of these opportunities to climb the property ladder.

So, what’s in store for 2022 and what will happen to house prices? With housing costs and interest rates both rising, there’s a feeling of unease amongst first-time buyers on what the future holds. 

However, demand still remains strong and early 2022 predictions could provide buyers with more affordable paths towards homeownership. To give you some insight into the year ahead, we’ve rounded up five key trends to look out for in the next twelve months.

1. House prices – rise or fall? 

Despite the coronavirus pandemic, the housing market has experienced a phenomenal boom throughout 2021. Increased demand has seen house prices soar to a record high, much to the delight of sellers. Although the same can’t be said for first-time buyers. 

With a 17% annual growth in house prices in the North West alone, growing worries amongst first-time buyers come as no surprise. However, there could be some good news on the horizon. The coming months may provide some relief to those hoping to hop onto the property ladder this year. 

Whilst it’s unlikely that house prices will drop in 2022, experts are predicting some stability after a frenzied year for the property market. This could mean the rate at which house prices are growing will slow down. Therefore giving first-time buyers a chance to catch their breath and embark on this exciting journey. 

Why won’t house prices drop in 2022? 

From demand to inflation, there are many reasons why house prices are unlikely to drop in 2022. Not to mention that the cost of materials, labour and land have all increased by around 30%, directly impacting the cost of housing.

However, despite last year’s house price hikes, demand remains strong. Currently, UK housing developers are experiencing around 15 buyers per house, which is showing no signs of easing in 2022. We’re also seeing an influx of first-time buyers relocating from the South to the North following the coronavirus pandemic. With more employers embracing flexible working, southern buyers are taking advantage of the North’s lower house prices and cost of living. 

2. Buyers influencing housing 

Despite demand outstripping supply, buyers are being more selective when it comes to picking a home. With the cost of housing increasing so rapidly, it’s not surprising to see buyers holding out for a property that ticks all their boxes. 

Another trend emerging from the pandemic is how people want to use their homes. House hunters are prioritising office space, light, internet connectivity and nearby green space in their search. Buyers want to enjoy a work/life balance through a dedicated home office, plus communal green space and parks for leisure. This trend is already having a direct influence on the design of new-build housing. 

What’s more, working from home saves money on the daily commute – a welcome relief when you consider the increasing cost of living. 

3. More mortgage options 

90% – 95% mortgages

Currently, 90% and 95% mortgages are still available, albeit 95% mortgages are quite limited. The good news for first-time buyers is that lenders are looking for ways to make mortgages more accessible. This is largely due to the current Help to Buy scheme coming to an end in April 2023. 

So, how are 90% and 95% mortgages being made more accessible? We’re finding that 90% mortgages are being the ‘norm’ again for first-time buyers. For those with a gifted deposit,  lenders are being more lenient with the criteria. This is providing you have sufficient evidence of where the gifted deposit has come from. 

So, if 5% came from savings and 5% was gifted, then buyers could be eligible for more favourable rates than they would have been 12 months ago. 

Deposit Unlock 

Deposit Unlock is the result of a collaboration between lenders and the housebuilding industry. The recently launched initiative enables both first-time buyers and existing homeowners to buy a new build property with just a 5% deposit. Not only that, but it also means that those using the scheme would benefit from exclusive mortgage rates, therefore making homeownership more affordable.

Income multiples 

Stress-testing is set to be relaxed on income multiples. This is the calculation for the maximum amount that you’re likely to be offered, based on your salary. Most mortgage lenders use an income multiple of 4 – 4.5 times your salary, whilst some offer 5 times and a few will use 6 times your salary. 

A handful of lenders have started to roll out ‘supersize’ mortgages, which offer 7 times your salary. However, this isn’t something that we would generally recommend. Our professional advice would be to air on the side of caution. Remember, just because you can borrow that much doesn’t mean that you should. 

4. More lenders create more competition 

Simply put, lenders want to lend. This is the primary driving force behind the increasing competition between mortgage providers. We’re already seeing more lenders entering the market, in addition to more product types – think green incentives and supersize mortgages. With so much choice for buyers, lenders need to be more competitive with their rates. 

But what does this mean for the future of mortgages? Early industry predictions include the possibility of tech giants throwing their hats in the ring – imagine Amazon or even Facebook mortgages! 

Tech companies have the knowledge to create bespoke user experiences that directly target the largest home buyer demographic, millennials. However, they do come with significant challenges with consumer trust, largely due to data breach worries. Of course, this is in no way confirmed by either company – only time will tell whether or not tech giants will step foot into the mortgage arena. 

5. Green Home Revolution 

The Green Home Revolution is here to stay, and for good reason! 

Powering and heating buildings make up 40% of the UK’s total energy use. So, reducing the carbon footprint of residential properties has become a huge priority. The biggest problem with UK housing is that older properties don’t meet the highest green standards – ie. an EPC (energy performance certificate) rating of A or B. 

However, figures from the Department for Levelling Up, Housing and Communities show that there has been a steady improvement in the energy efficiency of homes in England. In 2010, 14% of homes were rated C for energy efficiency. By 2021, this had increased to 46%.

However, the cost of ‘levelling up’ an older home comes at a price. A study by Nationwide Building Society found that the average bill for improving a property to a band C rating is around £8,100. Interestingly, the study also suggested that a high EPC rating attracts a 1.7% premium, meaning energy performance is also having some impact on house prices.

As a result, the popularity of green mortgages is soaring. Perhaps the most significant benefit of green mortgages is that a property’s energy efficiency rating directly influences a buyer’s affordability assessment. So, if the home you’re buying has a high EPC rating, then this could tip the scales favourably in regards to your affordability. Meaning that you’re more likely to be approved for a mortgage! 

To speak with an advisor about your mortgage options for 2022, call us on 0345 1645790 or email info@chartwellms.org.uk. You can also request a call back via our online form.