Rising prices and higher interest rates mean there has 'never been a worse time to buy your first house'

A Bayes Business School academic believes there has never been a worse time for first-time buyers to buy a house.

The Royal Institution of Chartered Surveyors say that 25 per cent of property professionals reported new buyer queries falling in July – for the third consecutive month – with little hope of the market recovering in the year ahead.

Professor Les Mayhew, a Professor of Statistics, says higher interest rates and the cost-of-living are two of the main causes, but adds the trend has been heading in one direction for years.

“House prices have been defying gravity for years and the gap between prices and earnings has not slowed,” said Professor Mayhew, who is also Head of Global Research at the International Longevity Centre.

“The prospects for first time home buyers have probably never been worse – those that are getting on the ladder are being helped by their parents and others, but this can't last forever.

“The surprising thing is that the market hasn't collapsed up to now, but I think a correction is imminent. Interest rates have risen which is impacting mortgage payments – and this comes on top of energy price hikes.

Professor Mayhew said there was more positive news for existing homeowners, but fully expects a fall in sales and mortgage contracts to be among the consequences of tighter purse strings. He also believes how the UK Government deals with the financial pressures could make or break whether there is a Conservative Government come the next General Election.

“Fortunately for homeowners, lenders are extending loan periods which is enabling the market to just stay afloat.

“There is currently a big asymmetry between buyers and sellers. Sellers, in the main, are not in any hurry to sell and are happy to wait until a buyer comes along. Buyers, on the other hand, are in a rush. Something must give.

“I expect to see a fall in sales and mortgage contracts and fewer new homes being built. The government has shown itself to be reluctant to intervene in the housing market apart from the Stamp Duty Holiday during the pandemic, but this is unlikely to be repeated. The financial pressures will fall on existing borrowers, and many could default. If this happens it will be an election losing scenario for the Conservatives.”

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