The Bank of England has done away with the mortgage affordability test that forced lenders to assess whether their potential borrowers could still afford their mortgage if interest rates rose by 3%. The test was scrapped because the BoE claim it to e redundant. There are still several other restrictions in place such as the loan-to-income framework, to ensure that lending doesn’t get out of hand causing a repeat of the 2008 financial crisis that some are already predicting will happen. Many are praising the change, seeing the test’s removal as an improvement. Previously, some people looking to buy their first homes would fail the mortgage affordability test despite already paying out in rent bills amounts that exceeded the potential mortgage payments. However, Mark Yallop, the chairman of the Financial Markets Standards Board doesn’t see the change making a significant impact as, “the biggest constraint on new mortgages is the ability of borrowers to afford a deposit.” And he’s probably right.

The cost-of-living crisis is eating into the nation’s pockets and although the rate of growth is slowing, property prices are still rising. For those racing to get onto the property ladder, they are simultaneously having to jump more hurdles whilst seeing the finish line dragged further away. The Office for National Statistics released recently that last year in March homes in England were selling for 8.7 times the average annual household disposable income. Which is the highest it has been since the records began in 1991. That statistic arrives in tandem with that from The Deposit Protection Service which has recorded the largest quarterly rise in UK rents for the fifteen years they have been tracking it. The rise of 2.47% has seen the average rental payment increase from £849 up to £870. For many of the potential first time buyers the end goal of purchasing their first property is quickly becoming unachievable. They are increasingly being priced out of the market because the overabundance of buyers competing over a limited pool of stock is keeping the prices high.

But is there a change on the horizon? Estate Agents across the UK are already beginning to claim that the buyer well is drying up. According to the latest HMRC Property Transaction Data the total number of Residential Transactions in the UK is down a whopping 55.1% when compared to the same time last year and commercial transactions are down 24.3%. The average number of viewings per property has dropped from April’s 6.2 down to 4.4 in June. Yet, despite this change in the market sellers are remaining steadfast in their pricing. Homesearch, the property data and estate agent platform, has recently found that 52% of homes that have been for sale for 10 weeks or longer have not reduced their price in that time.

We’ve discussed the conveyancing delays previously on the blog (you can find those posts here and here) but the blame for the delays in property transactions cannot sit solely with them. Agents and Sellers need to acknowledge the change in the market and reduce the prices as and when properties fail to sell. Recent data from Propertymark shows that nearly a third of their member Estate Agent branches are now reporting that most of their sales are completing below the asking price. This figure is almost double what the figure was in March. Starting with a price reduction garners more interest in buyers looking for a potential deal and when a property garners more buyer interest it can usually sell for a higher price, as the buyers will compete on the price.

This is fundamentally how the auction process works. Properties are advertised with a guide price. The guide price isn’t the auctioneer’s expectation of what the property will sell for. It is an indication of the seller’s reserve price. The seller will set a reserve price that will act as the minimum price they are happy to sell the property for at a live auction. As soon as bidding exceeds the seller’s reserve price the property will sell. Due the confidentiality around the seller’s reserve price the auctioneer will set a guide price. The guide price is set within 10% of the seller’s reserve, typically lower in order to peak buyer interest.

The auction process also benefits from contractual timescales. At Whoobid we tailor our auctions to the property and the seller. We offer to methods of auctions, traditional and modern. You can find out more about these methods in a previous post here. Essentially, traditional auctions exchange when the hammer falls and modern auctions have slightly extended timescales to cater for mortgage buyers. We also don’t hold mass auction days, Whoobid auctions properties individually to the seller’s and property’s needs, maximising your properties exposure and giving buyers enough time to view the property and assess the auction pack before bidding.