Financial Planning

Is a housing crash coming?

Is a housing crash coming?

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult an independent financial adviser.

Despite the pandemic, UK house prices appear to still be on the rise. In June 2021, for instance, prices rose by 13.4% over the previous 12 months – increasing, on average, from £216,403 to £245,432. Yet can this trajectory be sustained? Wages are certainly not rising to keep up with this, and the Stamp Duty Holiday is starting to wind up. Could a crash be on the near horizon?

In this article, we examine some of the factors that could lead to a housing market crash in the coming months and years, their likelihood and how this affects your financial plan. We hope you find this content useful. If you’d like to discuss your own financial plan with us, please contact our team for more information or to access personalised financial advice:

020 8366 4400 or


Reasons to be optimistic

The housing market does, of course, vary across the country. All areas have recently recorded growth, with London prices rising by 7.3%. Overall, the annual growth rate is the highest it has been since November 2004. A big driver appears to have been tax breaks for homebuyers during the pandemic, as well as more people moving out of urban areas to the countryside – seeking greener pastures after months of working from home.

Mortgages remain relatively cheap due to the Bank of England (BoE) base rate being set at an historic low, 0.10%. This can help buyers afford higher-cost properties and, optimistically, many analysts predict that a low base rate is likely to continue for some time – since any inflation rise (e.g. 3%) is expected to be short-term. Many younger people still struggle to save for a deposit. However, the Government announced a scheme in April which could help – offering a guarantee to certain 95% mortgages, helping first-time buyers gain a property with a 5% deposit.


Pessimistic scenarios

Whilst homeowners will likely have enjoyed the ride so far, there are headwinds to look out for. In particular, the end of the Stamp Duty Holiday is expected to end on the 1st October 2021, which could lead to a “cooling” in buying demand. This, in turn, could cause house prices to fall across the country. In a worst-case scenario, this could pierce the large mortgage credit-driven housing bubble that has grown over the pandemic, from £280m in April 2020 to £11bn in March 2021. Fortunately, the fallout to the wider economy would likely be less severe than in 2008. Banks are better capitalised today compared to the Financial Crisis (meaning their lending ability is less vulnerable). People across the UK have also built up higher savings during months of working at home, so consumer spending would likely be less adversely affected. Another possibility is that rising inflation becomes more sustained than the BoE expects, pressuring it to raise interest rates (something that would likely drive down house prices).


Implications for financial planning

Ultimately, no one has a crystal ball and, due to the pandemic, the economy is treading very much treading uncharted waters. As such, a good life principle to follow here is: prepare for the worst, hope for the best. First-time buyers may be anxious to get on the housing ladder. Yet as tempting as it may be to use a 5% deposit, it could be more sensible to build up your savings. After all, having more equity in your first home eases the pressure on your monthly mortgage payments and leaves you less vulnerable to possible interest rate rises in the future. Moreover, if housing prices do end up crashing, you may be able to get a better deal!

Homeowners have difficult decisions to make. However, one of the worst things you can try to do is “time the housing market”. In particular, trying to sell your home at a “high” in one part of the country and aiming to buy a property in another location at a “low” is extremely difficult to pull off. Instead, it is better to link your financial goals with the best from the current landscape. In 2021, for instance, mortgage rates are very low due to the low base rate. As such, whether you are thinking about moving or not, it may be worthwhile looking at remortgaging for a better rate. This could save £100s on your monthly payments.

Other measures you can take include ensuring that you have a healthy emergency buffer (e.g. 3-6 months’ worth of living costs), improving your credit score and taking appropriate steps to improve the value of your home. The latter needs to be done in light of your desired moving timescales and without jeopardising your finances – e.g. taking out debt to fund an extension, which may or may not pay for itself when you later sell the house.



No one can predict if – and when – a housing market crash will come. However, this does not mean you have no power over your mortgage and property. 

Interested in discussing your financial plan with an experienced financial adviser? Get in touch today to discuss your financial plan with a member of our team here at Cedar House via a free, no-commitment consultation:

020 8366 4400 or


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