Property viewings and potential sales have been hit on the Costa Blanca – amid the slump in the euro/sterling exchange rate.
“August was quiet, as usual, with the holiday season in full swing – but we expected to see a busy September,” an employee of a Costa Blanca estate agency told The Leader.
“Viewings arranged for early October have been cancelled – due to the euro/pound exchange rate dipping,” they said.
House viewings and sales are also reportedly collapsing – as mortgage market chaos makes UK home moves impossible for hundreds of thousands of buyers.
Purchasers are pulling out of transactions – sellers are accepting price cuts – amid experts warning the number of sales collapsing will surge in response to rocketing rates.
Lenders withdrew mortgage deals in the last week of September – at the fastest rate on record – as interest rate expectations exploded in response to the UK Chancellor’s mini-Budget.
The deals that are still available are rapidly becoming more expensive, with analysts expecting that average rates will soon exceed 6pc. Less than a year ago buyers could take out mortgages at below 1pc.
134,000 shut out
Soaring interest rate expectations mean at least 134,000 buyers have been shut out of the property market immediately, according to estimates from analysts at Capital Economics.
The current forecasts imply banks have already had to cut their maximum loan size, from five times a borrower’s income at the start of the year, to four, wiping out a third of borrowers taking out two‑year fixes.
UK Chancellor Kwasi Kwarteng’s tax cuts triggered a drop in the pound – to a record low – prompting fears of even higher inflation, which will push the Bank of England to make larger increases in the Bank Rate.
One estate agent said a growing number of sales would collapse in the coming months as delays meant buyers’ competitive mortgage offers would expire.
The time taken to buy a house is on average over 17 weeks. Most mortgage offers will stand for three months.
If an offer expires before completion, buyers will have to pull out or renegotiate the price, because higher rates will dramatically reduce how much they can borrow.
The Conveyancing Association, a trade body, said property lawyers had seen calls jump by a third.
One member is getting 300 extra calls a day. Sellers are asking if their buyer will lose their mortgage offer.
If they have an offer, that is binding. But if the offer has not been issued yet, they have to worry.
Lenders continue with mortgage offers that have already been issued, although in rare circumstances they can withdraw at any time before a sale’s completion.
There will therefore be a delay before the market turmoil hits transactions en masse. There are early signs that sales are already starting to collapse across the UK.
In the seven days up to September 29, the share of agreed sales falling through before completion was 30pc, reportedly according to property website Rightmove. This was up from 29pc in August.
There are now widespread forecasts for big house price falls. Investment bank Credit Suisse said values could fall by 10pc to 15pc.
Capital Economics said: “The outlook is not dissimilar from 1989 and 2006. Both of these moments preceded 20pc drops in house prices. Sellers are slashing their price expectations.
Mather & Murray Financial advisers said mortgage providers were also refusing to lend at the prices that buyers had agreed to pay: “Down valuations’ are coming thick and fast. Buyers will be left high and dry – as they have little chance of shopping around,” they said.
A plethora of properties have been placed on the market by expats – that have sold during the last 18 months/2 years within the Vega Baja region.
Now, many, more hopeful sellers could see a downturn in sales once again in Spain – balanced on the strength of the sterling/euro exchange rate.
Giving an insight, The Leader contact employee from a Costa Blanca estate agency said: “Clients have begun to cancel for the time being, with a view to go-ahead with viewings – when the euro/sterling exchange rate begins to move upwards.”