UK house prices to plunge 20% because of rate hike?

UK house prices to plunge 20% because of rate hike?

This is the latest news about the AU property market. Read the latest blog post here: Property market Australia showing a drop for the first time since 2018. Negative? It’s impacted by the rise in interest rate. Briefly, interest rate is not so great for the property market. Buyers will find repayments become higher, thus their application may not be approved by the bank. Sellers meanwhile may have to reduce their selling price as buyers are just not so happy to accept the same price as their repayment has been adjusted higher.

Now, let’s look at the impact from interest rate in the UK property market.

Article in theguardian.com “Property market has defied gravity for years but analysts say rising mortgage rates will mirror the 1980s price crash.”  Halifax bank said house prices are down by 4.3% from last August’s peak. Figures from the Halifax this week showed a first-time buyer was paying just over £300,000 to get a foot on the property ladder and needed a deposit of £62,000. More than 60% of mortgage completions were in joint names last year. Please do read the article with lots of other stats here: Article in theguardian.com

What’s the actual impact of interest rate rise?

Below are two images showing what happens when the interest rate rises by 0.5% for a RM500,000 home loan. The actual difference is RM131. How much would this impact the buyer or the owner would really depend on whether they were overstretched in the first place. If the owner did not buy a property way above his financial capability, this interest rate rise is likely to be okay for him.

Property price expensive or not depends on salary as well

In fact, this rate rise also depend on the property price. If the property price was already high in the first place, any rise would make matters worse. Whether property price is high or not is dependent on median property price versus median salary yeah. Just as RM1 million property is expensive for most Malaysians, AUD1 million property is also expensive for most Australians and S$1 million property is also expensive for Singaporeans. Just google and you would understand why I used 1 million as a benchmark.

Happy taking note.

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