What falling house prices could mean for first time buyers

Property experts have predicted that house prices will fall by 10% in 2023 as interest payments reach highs not seen since the 2008 financial crisis.

Following the chancellor's mini-budget announcement nearly 300 mortgage deals were withdrawn by banks and building societies, and the offers remaining on the market will mean huge borrowing costs for potential buyers which will reduce how much they can pay for a property. Therefore, if interest rates remain high then property prices are expected to fall.

The housing market has a huge impact on the rest of the economy, because people who have bought a house are more confident in spending their money on other things. If everyone is saving for a deposit they don't spend their money in businesses and boost the economy.

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But what do low house prices mean for first time buyers? Low house prices don't necessarily mean homes are more affordable, because they tend to come hand-in-hand with higher interest rates. So while deposits will be lower, potential buyers will have to balance that with higher mortgage repayments each month.

The government have taken steps to help first-time buyers, such as the help to buy ISA scheme, which has now ended, and a cut to stamp duty tax, with first-time buyers paying no stamp duty tax on on properties up to £425,000, whereas the threshold previously was £300,000.

Ray Boulger, senior mortgage technical manager at John Charcol, told BBC Radio 4’s Today programme: “I think we can expect to see a significant fall in house prices, perhaps around 10% next year.

“The key factor in house prices is how much people can afford on their monthly mortgage. The biggest issue is the monthly cost. With the cost shooting up so far a lot of people thinking of buying are going to rethink those plans. They may not buy at all. If they are going to buy they will buy at a lower level.”

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