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Why Do House Prices Fall?

Why Do House Prices Fall

If you have finally saved up your deposit and met the lender’s mortgage criteria, it should be time to celebrate as you head for the nearest mortgage advisor!

But if, like many homebuyers, you are currently sitting on the proverbial fence trying to decide if now is the ideal time to purchase a home; don’t panic; you are not alone.

You’ve probably found yourself questioning whether house prices are due to fall or if they are about to skyrocket and hit higher records than those seen in 2007; however, you might be interested to know that todays house price is lower by nearly 25k.

And if you are wondering what causes this fluctuation in price, it’s a lot simpler than those complicated mortgage calculations you’ve been struggling to get to grips with.

Let’s look at what causes house prices to rise and dip as they do.

What Has Caused House Prices To Fluctuate Recently

Unfortunately, covid-19 has had long-reaching effects on almost every aspect of our lives, including house prices.

After a two-month total market shut-down in 2020, 2021 was one of the busiest home purchasing years seen in a long time.

This saw an influx of homebuyers but not an increase in available homes for sale. Of course, this meant more buyers than homes for sale, preventing a fall in house prices.

Unfortunately, elevated house prices are the result of ‘supply’ and ‘demand’ – if the supply is low, but the demand is high, then house prices naturally follow suit and are more elevated.

Seasonal Demand Influences House Prices

However, even with lockdown disruptions, house prices have continued to rise and fall in much the same way as always, and these are almost always affected by seasonal demand.

For example, those seeking to move house won’t want to do this in the dead of winter or during the summer when on holiday.

This means that asking prices typically dip during the summer and then increase during autumn.

Then during the remaining months of the year, once the festive season starts, homeowners and potential home-movers are more focused on holiday celebrations than on moving home.

Which subsequently causes a dip in house prices again.

Will Autumn House Prices Increase?

After a long hot summer, autumn house prices could increase as homebuyers look to move before the new year.

This, coupled with the aggressive increase in energy bills and interest rates, will also negatively impact how many home movers can reasonably afford to move in the near future, thus causing house prices to increase.

Current Average Home Price For First-Time Buyers

The average price first-time buyers can expect to pay for their homes increases according to property size.

  • 1-2 bedroom £220,000 +
  • 3-4 bedroom £330,000 +
  • 5 bedroom + £660,000 +

Of course, these prices may be affected by other factors, which include:

  • Condition of the property
  • School catchment area
  • Local infrastructure
  • Potential for property improvement
  • Local amenities
  • Property Features
  • Parking

Getting The Answers  You Need

Unfortunately, researching scores of average national prices or reviewing the thousands of local property markets doesn’t always give you the answers you need regarding property prices in the area you live or where you want to purchase your new home.

A good rule of thumb is to calculate the amount you can reasonably afford to pay for a new home. Then once you have a budget in mind, use this to search for homes in the area or areas you wish to live in.

You can also check the land registry to see what homes in your current area have sold for, which will help you gauge the typical asking price for similar homes.

Lastly, don’t limit your new home search to set areas; expanding your search area can often present a wider range of available home options.

To Buy Or Not To Buy Right Now

Its common knowledge that interest rates have increased mortgage payments since the beginning of the year.

However, compared to rental prices, mortgages have increased at a slower pace over the past ten years than their rental counterparts.

So when considering if you should purchase a house right now, the answer is yes if you have enough deposit saved and meet the lender’s mortgage criteria.

Will You Find A Buyer Now?

Looking at previous market trends, autumn is typically the best time to jump into the property market.

This is usually the time of year homebuyers start thinking about making a fresh start in the new year.

It’s also the ideal time to start readying your home in preparation for putting it on the market.

To kick start the process, you should ask an estate agent to value your home, who will then list it on their website as for sale.

Still Not Sure?

Often the biggest source of homebuyer uncertainty is not being sure you are ready.

A ‘mortgage in principle’ can help determine how much you can borrow and provides the peace of mind and confidence you need when searching for your new home.

Once you have chosen a preferred lender or mortgage adviser, you will need to provide them with the following information when making your application for a MIP.

  • Personal information, including your name, date of birth, and address
  • Income details
  • Expenditure details

Always have your supporting documentation to hand if the lender requests this information when submitting your application.

A ‘mortgage in principle’ is valid for a 90 period and may be granted if you meet the lender’s criteria.

However, homebuyers should know that MIPs are not guaranteed mortgage offers, and additional factors can impact the application.

For example, stringent lender criteria, job loss, taking on new personal loans, increased number of dependants, or a reduction in your income.


Selling or purchasing a home in the midst of today’s price fluctuations can be daunting.

After all, so much contributes to the rise and fall of house prices, including going on holiday!

That said, whether you are in the market to sell or purchase a home, as long as you have the required deposit and meet the lender’s mortgage criteria, finding your forever home should be plain sailing.

If you’d like to find out more about how Ashtons can help you contact one of our branches for further information.

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