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Your March market update

Longer mortgage terms and house prices still on the up — despite rising interest rates and cost of living. We've got it all in your March market update.

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While the housing market is continuing to heat up (and up and up), property news is certainly making a splash once again this month. That’s why we’re here to look beyond the headlines and find out what’s really going on and — most importantly — what it all means for you. Whether you’re a buyer, a seller, or you just want to keep yourself up to date, we’ve got you covered.

Let’s talk about higher house prices, longer mortgage terms, and more. Welcome to your March monthly update.  

House prices soar — against the odds

In an unexpected turn this month, prices have spiraled again — for the seventh consecutive month — and are now up by 12.6%. According to Nationwide, the price of the average home increased by 1.7% in February to more than £260,000, and this upward trend shows no signs of slowing down anytime soon. And that may be a surprise to quite a few analysts.

But why has this happened? Well, it seems that the shortage of homes up for sale is still the main factor. But it may also be that there’s a rush happening. Some analysts are claiming that the end of COVID restrictions, coupled with uncertainty surrounding the war in Ukraine and the continued threat of interest rate rises from the Bank of England, could all be pushing buyers to try to secure homes before the peak of the Easter buying period. 

But this all came as a shock to those analysts who had predicted that the housing market might start to slow down in this pre-spring period. As Robert Gardner, Nationwide’s chief economist, has said: 

“The continued buoyancy of the housing market is a little surprising, given the mounting pressure on household budgets from rising inflation, which reached a 30-year high of 5.5% in January, and since borrowing costs have started to move up from all-time lows in recent months.”

Given the squeeze on household incomes as the cost-of-living crisis deepens, it seems even more unexpected that the housing market would continue to remain as bubbling as it is. This is fueling concerns that property prices are moving further out of reach for first-time buyers — especially if the growth continues. 

While spreading the cost of mortgage repayments over a longer period certainly takes the pressure off — making monthly bills more affordable in the short term — there are long-term implications too."

"A bit of breathing space"

Perhaps a little less surprisingly, this March we’ve also seen mortgage terms getting longer. “Mortgage terms” is just another way of saying how long your mortgages lasts for — and how long you’ll be making repayments. While the default for a mortgage in less uncertain times was usually 25 years, it’s now gone up to a whopping 30 or even 40 years. In March 2021, figures showed that 25,112 mortgages were taken out with a term of 35 years or more. This was a 70% increase from March 2019 — and an increase which looks set to rise again this year.

But why are people being drawn to longer mortgages? You guessed it, it’s the property boom again. Soaring house prices have made it harder and harder for buyers to make their way up – or even on to – the property ladder. 

David Hollingworth, associate director at L&C Mortgages, tells thisismoney.co.uk that: “You’re seeing first-time and next-time buyers pushing terms out at 30 to 35 years as they’re looking for a bit of breathing space when it comes to repayments.”

While spreading the cost of mortgage repayments over a longer period certainly takes the pressure off — making monthly bills more affordable in the short term — there are long-term implications too. The cost of paying interest over a longer span of years means that, ultimately, people are paying more over a longer period. It certainly is a double-edged sword. 

Hollingworth advises those thinking about longer mortgage terms to “have the discipline to revisit it or to completely change the repayment term as your situation improves … You don't want a mortgage beyond retirement if you can help it.”

So, while the market is still going strong — and shows no signs of cooling down anytime soon — it’s still a difficult time for buyers (particularly first-time or next-time buyers). We can’t predict what will happen next in this uncertain market, but we can promise we’ll be here to update you on any developments. Watch this space, it’ll definitely be interesting.