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Distressed Assets in the UK Property Market in 2023

As 2022 draws to a close, so too does a turbulent year in the UK property market.

The mini-budget in September sent shockwaves through the mortgage market, resulting in a rapid increase in mortgage interest rates. The Bank of England base rate now sits at 3.5% after the latest rise of 0.75% in November.

The Bank of England’s base rate is predicted to rise above 5% in 2023, meaning the best fixed-rate interest rate deals are likely to exceed 6% in 2023.

As well as tightening lending criteria, mortgage lenders are also stress-testing mortgage applications, assuming rates as high as 8%. 

Higher mortgage costs will likely mean that there will be fewer prospective buyers able to secure a mortgage, thus putting downward pressure on house prices.

High mortgage rates can have a number of effects on the broader economy and on individuals and households. 

For one, high mortgage rates can make it more expensive for people to buy homes, will likely mean that there will be fewer prospective buyers able to secure a mortgage, thus putting downward pressure on house prices. 

Additionally, high mortgage rates can also make it more difficult for people to afford their existing mortgages, which can lead to an increase in defaults and foreclosures. 

At SPPF, our property investment specialists believe that a lot of sellers will come into the property market next year. In doing so, our prediction is that there will be a lot of below market value, cheap properties – also known as ‘Distressed Assets’.

Distressed assets in property are properties that are being sold because their owner is forced to sell them. This could be because the owner is experiencing financial difficulty, has to relocate for work, or is facing other circumstances that require them to sell the property quickly. 

Because these properties are being sold under duress, they are often sold for less than their perceived value, which can make them attractive to buyers looking for a good deal on a property. 

If fixed mortgages are on the rise for property owners and they need to remortgage, they may not be able to borrow the same amount against the property when they come to remortgaging. Thus, people could be in an uncomfortable position where they are forced to sell.

At SPPF, the silver lining of this unfortunate downturn in the property market is that it will open up some exciting opportunities to uncover cheap finds in the market in Q2 and Q3 of 2023.

If you are looking to invest in buy-to-let property without the time, stress, and hassle of being a hands-on buy-to-let landlord, request a free brochure to learn more. Otherwise, get in touch and one of our property experts would be happy to discuss your requirements.