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House Prices Fall at Quickest Rate in Almost 14 Years

Home Insurance

House Prices Fall at Quickest Rate in Almost 14 Years

There is an undisputed degree of uncertainty in the housing market, with landlords continuing to sell properties as the government launches schemes in an effort to persuade first-time buyers to take their first steps on the property ladder to balance out the current climate.

Due to rising interest rates, many consequential factors have come to fruition, such as increasing rent rates, crashing house prices and a fluctuating housing market.

In a report released by Nationwide, house prices in the UK have plummeted at the fastest rate since July 2009. At a rate of 3.4%, this decline comes at a time when The Bank of England increased interest rates in the second quarter of 2023 and is expected to do so once again as they attempt to combat the unyielding inflation sweeping throughout the country.

With the property market weakening in demand, house prices have decreased as current asset owners look to cut ties amid speculation of rates continuing in their upward trajectory, potentially causing valuations to fall further.

UK Lenders Slowing on Mortgage Approvals

The Bank of England has reported that lenders approved fewer mortgages in April than in March. On top of this, new mortgage lending values also dropped due to the decelerating housing market. This comes with the prediction that the base rate will increase next year to an altitude of 5.5%.

In a poll conducted by Reuters, UK mortgage lenders gave the go-ahead for 48,690 new mortgages in April. However, this was a decrease of just shy of 3,000 mortgages compared to March, which saw a much higher figure of 51,488 mortgages approved by lenders. This was below predictions from a Reuters poll of economists.

UK Residential Transactions Drop by Almost a Third in a Year

In the space of 12 months, HM Revenue and Customs state that residential transactions dropped by 32%, with a total of 67,220 in April 2023, in contrast to 2022. There was also a drop of 29% in April when compared with March this year. However, HMRC has concluded that the significant fall between these two months is more down to the strength of March’s figures rather than the frailty of April 2023.

HMRC have also found that transaction amounts in March were more significant than in April due to factors such as more working days and deadlines surrounding the UK government’s Help to Buy Equity Loan Scheme.

What Does This Mean for Brokers and GI Business?

As mentioned above, schemes like Help to Buy and a growing number of zero-deposit mortgage plans may see an influx of first-time buyers enter the property market. Because of this, brokers need to adapt to a younger demographic and prepare to offer home insurance to people with little-to-no experience in the industry.

Our article, Preparing for the Rise of Gen Z in the Property Market, looks at how advisers can conduct business with younger generations and how Gen Z differs from other age groups.

With the valuations of properties starting to reduce, it could be the perfect time to remind your new clients of the importance of home insurance, with some clients potentially having more money to spare if they budgeted for higher mortgages. In addition, implementing GI into your services is easier with systems like Source Go, where you can eliminate regulatory responsibility completely, allowing you to provide the complete service your customers need and deserve.

Source Insurance has been helping brokers provide home insurance to their customers for over 25 years and continues supporting their advisers throughout the GI process. To discover more about what 2023 holds for Source and our brokers, take a look at our webpage here.

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