What’s in store for the housing market in 2018 and how it will affect house prices, mortgages and first-time buyers

If you're thinking of moving house this year, factors such as economic uncertainty may affect your p

If you're thinking of moving house this year, factors such as economic uncertainty may affect your plans Picture: PA Photo/thinkstockphotos. - Credit: PA

If you’re considering whether to move home this year, Ella Walker looks at potentially the main influences on house prices in London and further afield, and how they may affect buying and selling.

The housing market has been sending out some mixed messages recently – on the one hand there’s talk of consumers being reluctant to make big decisions amid wider economic uncertainty and a squeeze on their living costs, but on the other hand, house prices have continued to climb in many areas, with reports of a lack of properties to choose from in popular locations.

So what’s in store for 2018? Here’s a look at what the market could bring for house prices, mortgages and first-time buyers.

What will happen to house prices in 2018?

In general, predictions have ranged from house prices being flat across the UK to edging up by a few percentage points by this time next year. Economists believe the squeeze on incomes from inflation will limit what buyers are willing to pay.

Robert Gardner, chief economist at Nationwide Building Society, says: “How the housing market performs in 2018 will be determined in large part by developments in the wider economy. Brexit developments will remain important, but hard to foresee.”

Does that mean house price growth is expected to be subdued across the whole of the UK?

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This year has seen been big differences between areas of the UK in how the housing market has performed. The Royal Institution of Chartered Surveyors (Rics) has said pricing in Scotland, Wales, Northern Ireland and north-west England has been resilient compared with some other places.

While London has seen a cooldown, some other major cities, where housing affordability is less stretched, have been putting in a relatively strong performance.

Richard Donnell, insight director at property analysts Hometrack, says: “The likes of Manchester, Birmingham and Glasgow have seen market

activity increase and this has delivered above-average price growth of six to eight per cent for the last 12 months.”

Will buyers have more opportunities to bag a bargain?

When it comes to sealing a deal, more house sales are now going through at less than the original price sellers had wanted, according to estate agents. For some buyers, they may find there’s more room for negotiation, depending on what the local housing market is like at the time.

But the supply of properties on the market is still tight in many places, so sellers in these areas may feel more confident in holding

firm on price.

Across the UK, 85 per cent of properties sold for less than the asking price in November, according to NAEA (National Association of Estate Agents) Propertymark - the highest proportion since its records started in 2013.

One in eight (12 per cent) properties sold for the asking price and three per cent sold above the asking price.

What about mortgage deals?

Despite the Bank of England hiking the base rate from 0.25 per cent to 0.5pc in November, in general, the mortgage rates on offer are still “extremely low”, says David Hollingworth from broker London & Country Mortgages.

He says some rates on the fixed-rate mortgage deals on offer had started to edge up even before the base rate increase, with rates creeping upfurther across the mortgage market generally after November.

Home owners sitting on their lender’s standard variable rate (SVR), which happens after a particular mortgage deal comes to an end, may want to consider whether they can get a better deal, he says, adding that many lenders announced rate increases to their SVRs in line with the base rate hike.

Hollingworth says some mortgage borrowers will be receiving their annual statements in January, which can help them to take stock of whether they should make switching mortgage their New Year’s resolution or whether they are already on a good deal.

How about first-time buyers?

Hollingworth says there are still plenty of mortgage options available for people with lower deposits.

Those who have slightly less than a 10 per cent deposit may find quite a “substantial advantage” in being able to access a better mortgage rate if they can scrape together more cash to push themselves into the 10pc deposit bracket, he says.

In some good news for first-time buyers, Hometrack predicts this sector will make up the largest group of buyers in 2018.

Donnell says: “We expect first time buyers to be the largest group of buyers in 2018 accounting for over one in every three sales (35pc) and overtaking existing home owners (34pc) as new purchases by investors fall in the wake of tax changes.”