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Antony Antoniou – Luxury Property Expert

Should Struggling Mortgage Borrowers Sell Now Before House Prices Fall?

Struggling mortgage borrowers should sell now before house prices fall, lenders say

Should Struggling Mortgage Borrowers Sell Now Before House Prices Fall?


As interest rates continue to rise and mortgage borrowers find themselves struggling to keep up with monthly payments, lenders are advising them to consider selling their homes before the anticipated fall in house prices. The Bank of England’s efforts to tackle inflation have led to fixed home loan interest rates soaring as high as 6%. As borrowers in mortgage arrears become more indebted with rising rates, the Chancellor recently published a mortgage charter, urging lenders to offer flexible forbearance options. However, some industry experts suggest that voluntary selling may be the optimal solution for certain borrowers. This blog post examines the current situation and explores whether selling now is the right choice.

The Impact of Rising Interest Rates:

With the Bank of England increasing interest rates to curb inflation, mortgage borrowers have been hit hard. Fixed home loan interest rates have reached as high as 6%, creating financial difficulties for many homeowners. As rates climb, borrowers in mortgage arrears face the risk of further debt accumulation. In response, the Chancellor’s mortgage charter encourages lenders to provide forbearance options, such as temporarily extending the mortgage term or switching to interest-only payments without affecting the borrower’s credit score.

The Value of Voluntary Sale:

Mark Bogard, CEO of the Family Building Society, asserts that voluntarily selling homes may be the best choice for heavily indebted borrowers. He highlights a case where a borrower accumulated over £100,000 in credit card debt over two years while attempting to avoid selling through forbearance options. Hindsight from regulators suggests that selling earlier and clearing the debt would have been the optimal solution. However, the decision to sell is not an easy one, and Bogard emphasizes that it should be considered an absolute last resort.

The Changing Housing Market:

While house prices have fallen by approximately 4% since their peak last year, forecasters from Capital Economics predict an additional 8% decrease. This projection indicates an overall 12% decline from peak to trough. Bogard suggests that the earlier borrowers in debt choose to sell, the more equity they will retain. However, he acknowledges the difficulty of making this decision, noting that selling should be approached cautiously as it is influenced by the market conditions and individual circumstances.

Considering Equity and Market Conditions:

Charlotte Harrison, home financing boss at Skipton Building Society, advises borrowers to evaluate the equity in their property and decide whether they can weather the storm. She acknowledges that each borrower’s situation is unique and emphasizes that voluntary sale may be the best option for a small minority. One silver lining highlighted is the double-digit house price growth experienced during the pandemic, which means borrowers may have more equity compared to other market conditions.

The Last Resort:

The Financial Conduct Authority (FCA) has consistently maintained that repossession or sale should be a last resort for struggling borrowers. However, they emphasize that when other support measures fail, and borrowers experience serious arrears with an eroding ownership share, selling the house may be in their best interest. The FCA advises borrowers to seek personalized financial advice before making such a decision.

Avoiding Panic Selling:

Industry experts caution against following the panic-selling trend. London broker Martin Stewart advises clients to avoid rushing to sell in fear of missing out. If a glut of properties floods the market but lacks an equal number of buyers, the market may become gridlocked and result in a challenging selling environment. Stewart advises waiting for the market to stabilize rather than following the herd mentality.


Struggling mortgage borrowers facing rising interest rates must carefully consider their options. While forbearance measures offer temporary relief, voluntarily selling the home before a potential fall in house prices may be the optimal solution for some borrowers. However, it is crucial to evaluate individual circumstances, including equity and market conditions, before making such a decision.

Seeking personalized financial advice is essential in navigating this challenging situation.

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