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Housing market crash “inevitable” warns expert ahead of rate decision

A mortgage expert is warning that a housing market crash now looks ”inevitable” as expectations run high of what many be a bigger-than-expected rate rise today.

Yesterday the government announced that the headline rate of Inflation in the UK remained at 8.7 per cent in the year to May, the same figure as April. Rising prices for air travel, recreational and cultural goods and services were blamed for the largest individual price rises; food and non-alcoholic beverages costs rose in May as well, but by less than in May 2022.

However, the really bad news was that so-called ‘core’ - a key measure which strips out energy, food, alcohol, and tobacco - rose by 7.1 per cent in the year to May. That is the highest since March 1992. Core figures are typically considered to carry the most weight when the Bank of England looks at the state of the economy.


Now this inflation concern has prompted a prominent mortgage broker to say a housing crash is on the way. 

Jamie Elvin, director at Strive Mortgages, says: "The challenge of tackling inflation has been massively underestimated by the government. Now, it is over to the Bank of England to react, which will almost certainly pile further misery on borrowers as rates go up again. It's the perfect storm right now and the future feels bleak. 

“Expect the base rate to rise to 5.5 or 5.75 per cent by the end of the year. It's a ticking time bomb as 1.4m borrowers will see an end to their low fixed rates this year and the impact will be beyond words. I fear for the property market, and a crash seems inevitable at this point."

Not every analyst forecasts a crash but there is near-unanimity that the Bank of England will announce another base rate rise this lunchtime.

Sarah Coles, from business consultancy Hargreaves Lansdown, says: “For anyone with a variable mortgage, the likelihood of another rate rise means yet more pain. Plenty of those who moved onto a variable deal when their fixed rate expired had expected rates to have started to ease by now, so there’s a growing risk of rises that people hadn’t expected and cannot afford.

“For anyone looking for a fixed rate, the picture is even bleaker. It has already been a torrid few weeks, as mortgage rates have shot up. The market is pricing in several hikes over the coming months. 

“Just ahead of the announcement, it was expecting rates to peak at 5.81 per cent in February, and only start to fall gradually from there. This has pushed the average two-year fixed rate mortgage over 6.0 per cent. Higher core inflation is likely to reinforce the market’s conviction that rates will need to go significantly higher, and could power even higher rate expectations further down the line. Even the concern that rates could rise would bring more mortgage misery for anyone looking for a new deal or facing a remortgage.”

Meanwhile Chancellor Jeremy Hunt will tomorrow hold what some are calling an emergency summit with mortgage lenders. 

Hunt has already dismissed calls for tax incentives to be reinstated on mortgage borrowers and has ruled out other possible measures to help borrowers which may, he believes, indirectly fuel inflation. 

There is an agreement between banks, regulators and the Treasury that mortgage lenders are required to offer tailored support to those struggling to pay - this is considered to be the main issue to be discussed between Hunt and lenders tomorrow.

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  • George Dawes

    Thank you captain obvious


    Yes George. We all saw this coming- What a Surprise. Not.

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    Jamie & Sarah 2 more experts telling us what to expect after it has happened.

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    I don't understand why a 2% inflation figure is either desirable or considered to be achievable.
    What's so magic about 2% or is it just a number that seemed like a good idea in a bygone age and has just somehow become written in stone?

    With minimum wage increasing by around 10% how are businesses supposed to restrict price rises to 2%? Almost all other business costs have risen. Even if energy is striped out of the figures huge rises in electric and diesel are going to have fed into the cost of everything in the shops. Just about everything we buy has to be processed and transported.

    If the goal of 2% inflation was abandoned and replaced with maybe a floating goal of something more realistic would the BoE be able to avoid more interest rate rises and in doing so actually facilitate a drop in inflation?


    One downside of high inflation is that it gradually makes cash worthless.

    Peter Why Do I Bother

    If Jeremy does not address these issues he will be toast in the next election, what annoys me is all the banks and building societies have been briefed to increase prices before anyone can react.

    I have four properties coming to the end of fixes at the end of the year and I will let them run on SVR until this settles. If not I may just clear them with finance from here in the Middle East where it is a lot let volatile (never thought I would say that).



    The other side of the coin is it makes debt cheaper to pay back, which is why I am a fan of interest only mortgages where after 30 years, the debt is just about the cost of a new car.

     G romit

    It also does the same to Government debt, which might explain the lack of action by the Government/BoE.


    Robert - I am an anxious person, tend not to take risks and buy everything in cash - no loans. I don't even have a credit card.

    That does not make me a very good business woman, I know.



    I learned a long time ago that there is good debt and bad debt.

    Borrowing on credit cards or overdrafts or car lease agreements at between 15% and 50% or more to buy consumables or depreciating assets is bad debt.

    I have £10,000 on an interest free credit card for 2 years and I am getting between 4 and 6% interest on that money, so will get about £1000 free money from the bank over 2 years and I will then either pay the £10,000 back or repeat the exercise again, as I have done a few times already. I regard that as good debt.

    My £1 million of mortgage debt is fixed at 1.99% until 2027 and allows me to earn over £60,000 extra rent per annum compared to what I would earn if I reduced my portfolio by £1 million to pay back the mortgages. It also means that my kids' inheritance is £1 million less, saving £400,000 on inheritance tax. I regard that as very good debt as that £400000 will pay 20 years worth of interest whilst earning over £1.2 million inflation linked over the 20 years from additional property that will also increase in value.

    Incidentally whilst allowing my wife and myself a very comfortable lifestyle I have also given away lots of inheritance tax exempt cash to my grown-up kids instead of giving it back to the mortgage companies.

    I have always been very contrary and found being a contrary investor and going the opposite way from the herd works well for me.

    Follow the herd and you'll be breathing in stinking smells and walking through dung!


    Those sound like brilliant arrangements, Robert!


    Available from a bank near you!

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    It’s plainly obvious that a decent price correction is about to hit, we are beginning a time of hard choices, but as landlords we are some of the best placed to weather it…. Think of those who don’t even own one property…their own home 😱😱👎🏻👎🏻

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    Simon, many landlords are not best placed at all but in serious trouble. The ones that haven’t bought are the lucky ones.


    If repossessions became a big problem I bet the government will lean on their banking pals to go easy to avoid adding to the homeless problem.


    Guess what?

    Jeremy Hunt has persuaded his banking pals to delay repossessions for mortgage arrears for a year, completely ignoring the fact that it takes a year to get a repossession, but nothing about writing off arrears, penalty charges or additional interest on late payment which will eventually be recovered from the sale of the property if not possible in any other way.

    No doubt Shelter will be clamouring for a further year's grace on rent payments which are typically lower in real terms than in recent years.

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    I'm not so sure there is going to be a the fall in prices some are predicting... at least not across the board (all houses, all areas).

    The reason is simple.... Prices go down when supply out strips demand but don't whilst demand outstrips supply. With the interest rate rise, there will be an decrease in demand (from people unable to pay the increased mortgage rates) and an increase in supply (from defaults). It's why they're predicting the fall.

    However, we're in an unusual position where just after the pandemic, savings and mortgage repayments are at all time high (thanks gov for paying everyone 80% across all incomes to ensure we increased the debt that we can never pay back).... and it means there is a lot of padding to get washed away before the increased rates really bite. Couple this with years of slow building and we have a huge problem in housing especially rental stock but also sales stock. Currently in many areas houses are selling quickly because there are at least four buyers for every property up for sale.

    I think there will be some price fall in some areas and with some housing (not least because we're already seeing this) but I doubt we're going to have the huge across the ball fall some are predicting!

    Peter Why Do I Bother

    Fully agreed Darren and still not building enough, been this way for over 30 years and what has been put on here earlier raising rates helps the government pay down debt quicker.


    It is getting harder to predict in truth. Nobody expected inflation to stay at 8.7%. The Bank of England need to walk a steady path here and I hope no more than 0.25% today but worried that they will over react and go 0.5% or higher.
    Most homes are either owned outright or are on a fixed mortgage. This will keep house prices steady. For those on variables, me included, we are paying the brunt of these rises but we are the minority. Loans, credit cards etc are all up and this will curb some spending, but the Bank of England need to hold steady and allow time for their increases they have made already to effect more people. Most importantly new loans will cost more which will curb growth!
    What the Government could do though is get rid of Section 24 and give greater stability to the rental market. This is now a tax that will destroy some mortgaged Landlord's as it makes BTL simply not viable, if there is a flood of properties coming to the market then this will temporarily bring prices down.
    And if this happens then the Council's will have a problem where to house everyone during this process and this problem has been made by this so called tory Government.

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    A big problem we have is having to wait to be in the product switch time window or pay big Early Repayment penalties. Some lenders have extended the window without actually telling their customers.
    TMW was always 6 weeks (which basically meant there wasn't time to remortgage elsewhere). Now the window is 3 months. I only came across this by pure chance.
    Paragon didn't used to allow capital repayments unless you let the product roll onto the SVR for a month. Now they give you 48 hours to make an overpayment from the time you accept the new rate up to 6 months before it kicks in. Unfortunately they haven't publicised this so it took me completely by surprise. I was all set to agree to the eyewatering 6.59% rate they were offering last week and got all excited about the 48 hour window (which I'd assumed was from 1st December when the new product kicked in). I was bitterly disappointed that the 48 hours was from the moment a new rate was selected so now I can't do anything until October when another remortgage completes and funds are available.
    Then there is the added complication of lenders relying too heavily on out of date credit scores. We both have totally perfect credit scores, with no missed payments whatsoever. We have been turned down for a remortgage and further advance by TMW (who we have had several mortgages with for many years) because my husband's credit report showed a 51% utilisation rate on unsecured credit. They had double counted a balance transfer and the report was about 2 months out of date.
    So my plan to consolidate as much borrowing as possible on the cheaper to mortgage properties (not licenced HMOs) is being thwarted at every turn.
    Then people will be complaining about sky rocketing rents!

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    Darren, you cannot say that the Market has been nobbled, you can’t leave out Section 24 & Section 21, as if it didn’t matter you can’t ignore that it has to be taking into account .


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