UK Recession: How will it impact mortgages and more

A recession can have a substantial impact on the housing market and mortgage rates. However, the positive or negative impact really depends on how long we’ve been in the recession and what position you’re in when it comes to buying or selling a home.

How a recession impacts house prices in the UK

Effect on Property Value: A recession can sometimes have a negative influence on property values. However, how much property values fluctuate can differ based on factors such as employment rates, continued demand and other financial factors impacting people’s overall affordability. Whether in a recession or not, these factors will always impact the value of property.

Impact by region: Recession or no recession, location is always an important factor in the value of housing and the demand. While sought-after areas may exhibit a more resilient property market, less desirable locations may encounter more challenges.

Impact of a recession on UK mortgage rates

Reduced Interest Rates: During a recession, central banks often employ monetary policies to boost economic activity, usually involving a reduction in interest rates to stimulate borrowing and spending. Consequently, mortgage rates may decrease.

Lee Cardwell, Director of Mortgage Advice Bureau, says “Inflation has remained at 4% which is better than expected news.  This will hopefully be a good reason for the Bank of England to reduce the base rate in the future.  This coupled with the news this morning that we are officially in a recession now, may be the catalyst for reductions [in mortgage rates] sooner rather than later.”

Enhanced Affordability: Lower interest rates can improve the affordability of mortgages for buyers. This can be especially advantageous for those seeking entry into the property market or existing homeowners looking to refinance their mortgages.

How does a recession impact first time buyers

A perfect storm for first time buyers: First-time buyers may discover that lower house prices and decreased mortgage rates during a recession provide opportunities to step into the property market. Increased affordability may make homeownership more attainable.

Please be aware, it's crucial to recognise that these are general trends, and individual circumstances may differ. Economic conditions, government policies, and global factors can collectively influence how a recession shapes the housing market. Additionally, local market dynamics play a pivotal role in determining the specific impact on property values and mortgage rates in diverse areas.