Home sales are stopping across the country as a spike in price cuts pours cold water on the hot real estate market.
For almost two years, house prices have skyrocketed: the average house now costs £ 286,079 – an increase of 10.8 per cent in the last 12 months alone, according to Halifax.
High demand among buyers looking for more space, combined with a shortage of supply has sparked trade wars, pushing supply far above asking prices.
Overheated market: high demand among buyers looking for more space combined with supply shortages, sparked a war for bidding, pushing supply far above asking prices
But brokers say they are now seeing lenders apply the brakes and increasingly reduce the cost of homes by tens of thousands of pounds.
This means that banks and construction companies do not believe that real estate is worth the agreed price, so reduce the amount they are willing to borrow.
If buyers are unable to secure the mortgage they want, they will need to negotiate a cheaper price with the seller or earn extra money to bridge the gap.
If neither is possible and the other lender does not offer a larger mortgage, it can lead to the collapse of entire chains.
Experts warn that this may be the first sign that the real estate boom after the pandemic is coming to an end.
Emma Jones, a broker and owner of Alder Rose Mortgage Services, claims that about a fifth of her clients now say their property is worth less than the asking price.
“Over the last few months, we’ve seen about twice as many declines as before,” she says.
“This shows that lenders are more cautious. And that’s what we see everywhere, and in holiday vacations too. “
The bank said the house cost £ 35,000 less than our offer
Maria Ivanova’s dream house was valued at 35,000 pounds
Maria Ivanova was desperately looking for a bigger home for her family of three. She and her husband, Paul Swede, 43, owned a two-bedroom apartment in Greenwich, London, where they lived with their seven-year-old daughter, Julia.
In February, they found a detached three-bedroom house in Bexlichit with a asking price of £ 440,000 to £ 460,000.
33-year-old Maria, who runs the pub, says: “We were told that at least two other spectators were interested in the house, so two days later we made an offer of 455,000 pounds.”
However, their creditor reduced the value of the property to £ 420,000.
Fortunately, after some negotiations, the sellers agreed to accept 427,000 pounds – and Mary and Paul were able to pay an additional 7,000 pounds.
Maria says: “I was shocked to learn that the score was much lower than requested.
“If the sellers hadn’t agreed to a smaller offer, we would probably have left.”
Housing price growth slowed last month, rising 1.1 percent from 1.5 percent between February and March, according to the latest Halifax data.
And analysts at Capital Economics predict that next year prices will fall by 3 percent.
Experts say an increasing number of reports of declining ratings are supporting the trend.
Dominik Lipnicki, director of Your Mortgage Decisions, says: “Human nature is that appraisers can be more careful when they know there has been such a long period of rising house prices.
“If it’s not a gap, but a general trend, then it could be a sign that rising real estate prices are about to slow down.”
Over the past two years, Wales has been the region with the highest number of downgrades, according to research by real estate buying experts HBB Solutions.
And that shows a 63 percent drop in value.
Unrealistic prices: Brokers say they are now seeing lenders apply the brakes and increasingly reduce the cost of homes by tens of thousands of pounds
Carol Pete, managing director of the West Wales Procurement Agency and who has worked in the area for 18 years, says buyers need to secure significant deposits before betting on homes in popular coastal towns because it is difficult to negotiate price cuts.
She says: “It is not uncommon for £ 600,000 bids to be reduced by £ 50,000 as bidding leads to oversupply.
“And the competition for some properties is so fierce that sellers know they will be able to find another buyer willing to pay the price.
“One of our clients, who was buying a property with a beautiful sea view, had its price reduced by £ 45,000.
“Fortunately, I warned them that it probably would, and they had a large enough cash deposit to cover the difference.
“This is a serious and serious problem for many people who are buying property in Wales and it is leading to the breakdown of chains.”
Kate Burns, founder of KB Mortgage Services in Huddersfield, says she has also seen an increase in the downgrade over the past two months.
One of her clients accepted an offer of £ 300,000 for a four-bedroom house at the end of a terrace in Halifax, but the lender said she believed it was worth just £ 270,000.
“At the moment the buyer is trying to negotiate a price of up to £ 287,500.
“They currently have a mortgage loan of 2.29 percent with a 15 percent deposit, but if they need to borrow more, they will be charged a higher rate of 2.5 percent.”
Buyers with smaller deposits usually pay much higher interest rates. Mortgage rates are still relatively low by historical standards, but are rising.
The average two-year fixed-rate mortgage now stands at 3.03 percent, up from 2.57 percent at this time last year, according to Moneyfacts analysts.
The Bank of England’s base rate rose to 1 per cent last week – the fourth straight increase in five months – which will further boost the cost of borrowing.
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