Graphic of 4 houses with bubbles over them. Indicating a bubble bust in the housing market.

Will the housing market crash this year?

With the economic crisis brought on by the global pandemic and Russia's invasion of Ukraine, you may be worried that purchasing a home could put your finances at risk.

7 min read

Are you thinking of buying a home but wondering if now is the right time? With the economic crisis brought on by the global pandemic and Russia's invasion of Ukraine, you may be worried that purchasing a home could put your finances at risk. The truth is, there's no definitive answer to this question yet and it ultimately depends on several factors.

What we do know is that mortgage rates are currently on the increase, meaning financing a property can be less affordable now than ever before. Additionally, many areas are seeing an increase in housing demand as buyers compete for properties, pushing the asking prices higher.

As we move into 2023, there are a few things to keep in mind which could help you make an informed decision. It’s always important to research the local market before making any major purchases, and this is especially true now. Make sure you understand the recent trends in your chosen area in order to get an accurate picture of the current state of the housing market. It is now more important than ever to understand your affordability, we can help you with this. Your Hello Mortgage, mortgage adviser will run an affordability check with you and tell you what your maximum loan amount it. This information will help you find a property that is within your budget.

In short, whether or not the housing market will crash this year remains uncertain. However, by doing some careful research and seeking expert advice when necessary, you can give yourself the best chance of making a smart investment that works for you. With so much uncertainty about mortgages and interest rates, it can be difficult to determine whether investing in your first home or moving up the property ladder is the right thing to do. Choosing a trusted mortgage adviser to guide you is key as they will help you decided on the best options in terms of high deposit mortgages, 5 year fixed rate deals or 2 year fixed rate deals, etc..

Perhaps one of the most daunting questions on people’s minds today is: Will the housing market crash this year and could i end up in negative equity? In this blog post, we’ll explain what causes a housing market crash, look at some factors that point towards a potential dip in prices, and offer some practical advice on how best to approach your home purchase given this unpredictable climate. So read on to find out what you need to know before taking the plunge!

Overview of the Current Housing Market

Home buying has been full of twists and turns over the past year. With mortgage rates at historic highs, many are asking if this is the right time to take the plunge and buy a home. With limited supply in the market, individuals looking to move may find themselves offering well above the asking price to win the property; however, there are still questions swirling around potential market crashes and what could happen to mortgage rates going forward. It’s important to remember that any decisions about purchasing a home should factor in mortgage rate increases, as well as house prices and mortgage options currently available. Despite current economic uncertainty, it’s clear that buying a home will always remain a key priority, even if it may not seem like the most financially sound decision at first glance.

This is a especially worrying time for those purchasing with a low deposit as the risk of ending up in negativity equity is far greater should the housing market drop. Being in negative equity can have serious financial implications for you and can lead to server financial losses. Coupled with this is rising interest rates at the end of your fixed rate deal. A rise in the interest rate can heavily impact your budget and in the worst case your mortgage repayments could be unaffordable which could lead to repossession. This is why it is more important than even to work with a trusted mortgage adviser.

Reasons why the Housing Market Might Crash

The housing market looks like it might be on the brink of crashing. Prices for houses have been increasing over the last few years and there does not seem to be a way to slow them down. Although interest rates were recently increased, this doesn't seem to be deterring people who are in the market for a house right now. If house prices remain high and interest rates continue to rise, this could eventually cause the housing market to crash, potentially making it difficult to sell a home, force lenders to increase rates which will make mortgages more expensive, or remove properties from the market due to negative equity. If you're considering buying a house right now, it's best to do some research on the current house prices and interest rates in your area so you can make an informed decision that suits your best interest and work with an experienced mortgage adviser.

Signs of a Potential Housing Market Crash in 2021

With base rates increasing from 0.1% to 4.0% the Bank of England have made it clear that further increase could happen throughout 2023. However, there are also signs that further mortgage rates could be impacted; with wage stagnation, rising unemployment, and the cost of living crisis all playing their part in deterring potential buyers or making them unable to afford properties. Although it's impossible to definitively predict what might happen to the housing market over the next year, it is important to be aware of some of the potential pitfalls that might lead to a crash.

What Effect Could a Possible Housing Market Crash Have on Homeowners and Buyers

With mortgage interest rates at an all-time high, now is a challenging time for buyers to purchase or refinance a home. There has always been the possibility of housing market crashes, which could spell disaster for both current and potential homeowners. For current homeowners, a housing market crash will likely mean depreciation of their homes causing them to lose equity in their property, this is negative equity. Also, mortgage interest rates are likely to quickly jump higher should a crash occur, leaving the homeowner on the hook for making payments at higher rates and facing expensive refinancing or even not being able to afford their repayments. For potential buyers contemplating entering the market, a crash could make buying more expensive due to sudden shifts in mortgage interest rates and drive up prices of certain housing markets as opportunities become scarcer. Homeowners and buyers alike need to be aware of these risks and be prepared if they face a dramatic change in the real estate market. We are here to help you understand these risks and can make a number of recommendations to help safe guard you in the medium to long term. If you have are currently behind on your mortgage payments or your budget shows you are going to face finical difficulties you should speak to your lender as soon as possible.

How to Protect Yourself from a Potential Housing Market Crash

To protect yourself from a potential crash, it is wise to review fixed rate mortgage opportunities and consider debt consolidation options to make your monthly payments more manageable. it is vital that you use a mortgage broker such as Hello Mortgage to help you understand your options, your budget and the likely impact of further increases. If you decide that now is not the right time for you to invest in property, there are still steps you can take to make sure you are ready financially should you decide later on. We always recommend saving as much as possible towards your deposit. Low deposit mortgages do help you to get onto the property ladder but are more expensive and put you at a higher risk of negative equity should the housing market drop. Have a bigger deposit and keep your debt to a minimum is the golden goose when applying for a mortgage.

Final Thoughts on the Future of the Housing Market in 2023

Everyone wants a house, and 2023 is likely to be an exciting year for house-hunters. However, the changes with interest rates could still impact house prices, particularly if they rise higher than expected. When asking the question “is now a good time to buy a house?” you should consider not only the house prices at present, but also factors such as your deposit, your current debt levels and how you would afford your home should interest rates rise again. Despite all that speculation, we can expect that despite some fluctuations in house prices a crash like the one seen in 2007 is unlikely but there could still be turbulent times ahead.

The housing market for 2023 looks a uncertain. We can’t definitively say what will happen, and there are no sure-fire ways to protect your home from disruption in the market. However, it's important to be aware of the signs of a potential housing market crash, so that you are in the know should any shifts occur. While there is much debate over whether now is a good time to buy a home, it is best to perform research before making large financial decisions and to use a mortgage broker. If you have mortgage requirements or need advice on how to handle your safety net for this year’s housing market, contact us today so we can help guide you through these tumultuous times.

By making sure you are educated on current housing trends, doing research before making any decisions, and taking advantage of the skills and knowledge of our mortgage advisers, you can be confident that your 2023 home purchase will be an informed one. It is also important to consult with industry professionals such as Estate Agents when seeking advice or guidance on the best way to approach the ever-changing housing market.

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