The latest data from the Building Societies Association (BSA) Property Tracker Report shows that confidence in the housing market is at its lowest since the Report began at the height of the 2008 financial crisis and has more than halved over the last 12 months.
According to the data, just 18% of people think now is a good time to buy property – this is down from 37% 12 months ago. 48% of people say affordability of monthly mortgage repayments prevent the purchase of property, which represents a 9% increase up from 39% just three months ago.
The reasoning for this is said to be a “cocktail of double-digit house price growth, rising interest rates, the escalating cost of living and the Russian invasion of Ukraine”.
House prices have grown significantly over the last year – the UK House Price Index revealed a £27,000 annual increase in February. 48% think this will continue over the next 12 months. Despite this, 12% think house prices will fall, with one in seven saying this fear would prevent them buying property.
Interest rates are also on the rise, with the monetary policy committee of the Bank of England announcing an increase from 0.5% to 0.75% on Thursday. Despite this, 90% say they are confident they will be able to meet their regular mortgage payments over the next six months, with just 1.8% not confident they will be able to, which is unsurprising given 81% of UK mortgages are fixed-rate.
The increasing cost of living – which is likely to worsen with Russia’s invasion of Ukraine – is also affecting consumer confidence, with 65% saying they are worried about prices rising over the next six months. 17% say they will be depending on savings to cover this increase in costs. It is, therefore, no surprise that raising a deposit remains the biggest barrier to purchasing property, with 59% citing this issue.
Paul Broadhead, Head of Mortgage and Housing Policy at the BSA, said:
“It’s good to see that, despite being in a rising interest rate environment, the majority of mortgage holders remain confident that they will be able to continue to make their mortgage payments. However, the increase in the number of people citing mortgage affordability as a barrier to buying a home is likely to continue if we continue to see high demand and low supply in the housing market.
Price growth at the current pace is clearly unsustainable and a much higher volume of new build and resale homes coming to market is needed to change this dynamic. Whilst lenders expect some flattening of new mortgage demand as the year progresses, we anticipate that the re-mortgage market will remain buoyant.
As we all experience the impact of the rising cost of living, and watch the how the Russian invasion of Ukraine and the consequent sanctions is affecting energy prices, it’s not surprising that many are feeling worried about making their budgets stretch and considering changes they can make.
During the pandemic overall savings balances increased by almost £300 billion so it is not surprising that some people are now planning to use this buffer to help cover their increased costs.”
