Are house prices collapsing or rising? Why you shouldn't believe everything you read in the headlines

Last week, house prices were apparently collapsing, with one newspaper warning that negative equity was already here and a housing market crash had begun. Fast forward a week, and the same newspaper is reporting that UK house prices have jumped by thousands of pounds in October.

So, which is it?

The reality is that neither headline tells the whole story, and if you're thinking about buying a home, selling your property or remortgaging, it's worth looking beyond the headlines before making any decisions.

Why do house price headlines change so dramatically?

Newspapers have a job to do. They need people to read their articles, and dramatic headlines are a good way of getting attention. Unfortunately, when it comes to something as important as buying a home, these headlines can cause unnecessary worry.

The two articles I've highlighted are a good example. One warns that the housing market is collapsing, while the other reports that asking prices have increased by £3,575 in a single month.

Both may be drawing on genuine information, but the way that information is presented can give two completely different impressions of what's happening.

There's also an important distinction between asking prices and actual sale prices.

The figures reported by Rightmove are based on the prices sellers are asking for their properties when they come onto the market. They don't necessarily reflect what buyers are actually paying.

And while an increase of £3,575 might sound significant, it's important to consider that figure in the context of average UK house prices, seasonal changes and what's happening in different parts of the country.

There isn't one housing market

One of the biggest problems with national house price headlines is that they treat the whole country as though it's one housing market. In reality, property prices can behave very differently depending on where you're looking.

A three-bedroom house in Poole might be attracting plenty of interest, while a similar property in another part of the country, could be sitting on the market for months. Even within the same town, demand can vary considerably depending on the type of property, its condition, location and asking price.

That's why national statistics, while useful for understanding broader trends, don't necessarily tell you very much about the property you're interested in buying or selling. If you're considering making an offer on a property, looking at recent comparable sales in that particular area is likely to be far more useful than worrying about a national headline.

What about negative equity?

Negative equity is another term that understandably causes concern, particularly when newspapers suggest that it's becoming a widespread problem. Put simply, negative equity is when the outstanding mortgage balance is higher than the value of the property.

For example, if you owe £200,000 on your mortgage but your home is only worth £190,000, you would be in negative equity by £10,000. It's something to be aware of, particularly if you're buying with a small deposit and may need to sell again relatively quickly. However, a fall in house prices doesn't automatically mean that everyone with a mortgage is suddenly in difficulty. Homeowners who have built up equity through their deposit, mortgage repayments or previous increases in property value may have a considerable buffer before negative equity becomes an issue.

And even where someone does find themselves in negative equity, the implications will depend on their circumstances, including whether they need to sell or remortgage.

It's a risk worth understanding, but not necessarily a reason to panic.

Should you wait for house prices to fall before buying?

This is a question that comes up regularly when we're speaking to first-time buyers.

It's understandable. Nobody wants to buy a property only to find that it's worth less a year later. But trying to predict exactly what will happen to house prices is incredibly difficult.

If you decide to wait for prices to fall, there's no guarantee they will. And even if they do, that doesn't necessarily mean you'll be in a better position to buy.

Mortgage interest rates could have increased, lending criteria might have changed, or the type of property you're looking for could have become more difficult to find. Equally, rushing into a purchase because you've read that prices are increasing isn't sensible either.

The most important question isn't whether house prices will be higher or lower next month. It's whether buying a particular property makes sense for you.

Can you comfortably afford the mortgage payments? Have you considered the other costs of homeownership? Are you likely to stay in the property for a reasonable period of time?

These are the things I'd encourage buyers to focus on.

Mortgage rates matter too

House prices are only one part of the equation. For most people, the cost of their mortgage will have a significant impact on what they can afford to buy. A relatively small difference in mortgage interest rates can have a meaningful impact on monthly repayments, particularly when borrowing larger amounts.

This is another reason why trying to time the housing market can be difficult. You might save a few thousand pounds on the purchase price by waiting, but if mortgage rates have increased in the meantime, you could find yourself paying more each month. Of course, the opposite could happen too.

Rather than trying to predict the future, we prefer to help clients understand the options available to them now, what they can comfortably afford and how different scenarios might affect their plans.

Make your own mind up, don't let the newspaper do it

I'm not suggesting that house prices can't fall, or that there aren't genuine challenges in the housing market. There are, and it's important that buyers understand the risks involved in taking on a mortgage. But there's a big difference between understanding those risks and being frightened into making a decision by a dramatic headline.

The housing market is far more complicated than a newspaper headline can explain, and what happens nationally may have very little bearing on your own circumstances.

If you're thinking about buying your first home, moving or remortgaging, my advice is simple.

Look beyond the headlines, speak to people you trust and make a decision based on your own circumstances rather than trying to second-guess the market.

At DLi Mortgages, we're always happy to talk through your plans, explain your mortgage options and help you understand what might be achievable. There's no pressure to make a decision, and sometimes the right advice might be to wait. But if you do decide to go ahead, it should be because you've made an informed decision that's right for you, not because of something you've read in the newspaper.