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Housing market sentiment remains low as Bank Rate increases by a further 0.5% to 5.0%

Building Societies Association

3 min read Partner content

Commenting on the increase in the Bank Rate by 0.5% to 5%, Andrew Gall, Head of Savings and Economics at the Building Societies Association (BSA) said:

“With inflation remaining persistently high, and the Bank of England raising the Bank Rate 13 consecutive times, it’s not surprising that overall the sentiment in the housing market remains low.

“The cost of living crisis, which is leading to increases in most areas of household expenditure, means family finances continue to be under pressure.

“Whilst the vast majority of people say they have been confident that they can maintain their mortgage and rental repayments, wider economic indicators suggest payment difficulties may start to tick up. Lenders are conscious that each mortgage in arrears is a real worry for the individual or family affected, and have experienced teams, with a wide range of options, ready to offer practical, tailored support to anyone who may be struggling.”

Property Tracker Report

The BSA’s latest quarterly Property Tracker survey ran 1-2 June 2023, before the latest moves in market interest rate expectations. Even then, mortgage payment affordability was the biggest obstacle to buying a home.

The proportion of people who think now is a good time to buy a property has fallen back to the same level as at the end of last year. Just 14% think now is a good time to buy a property, the same as it was in December 2022, and the lowest level since the research began 15 years ago.

Those who specifically think now is not a good time to buy a new home is three times higher (42%), rising to 61% of those who would be first-time homebuyers.

Impact of Bank Rate rises

Since the first Property Tracker in 2008, raising a deposit has almost always been the biggest barrier to buying a home, dropping to second place during the Covid-19 pandemic, when lack of job security was cited as the biggest obstacle.

However, with 13 Bank Rate rises since December 2021, being able to afford the monthly mortgage payments is now the biggest blocker to buying a home.  Almost two-thirds (65%) of people now cite this, compared to just 39% who mentioned it in December 2021. In the three weeks since the survey was run, mortgage rates have risen as new economic data on inflation and wages has pushed up the market rates on which they are based.

Raising a deposit continues to be a significant obstacle to buying a property for a large proportion of people (58%). However just one in five think a lack of job security (19%) and concern about house prices falling (20%) would prevent them from buying a new home.

Affordability concerns – Homeowners versus Renters

When asked at the beginning of June about the affordability of monthly mortgage or rent payments over the next six months, the majority of both mortgage borrowers and those in rented properties did not express concern about keeping up with their monthly housing costs.

Almost nine in 10 (89%) mortgage borrowers were not concerned about keeping up with their mortgage payments.  The remaining 11% were not confident about maintaining their mortgage payments over the next six months, of which 3% were not at all confident.

Renters were less assured, with one in five (20%) expressing concern about meeting their housing costs, 6% of whom were not at all confident.

House prices

Although price expectations for the year ahead remain low, they have recovered a little since the end of last year. In December 2022, almost half (49%) thought a price fall in 2023 was likely. However, this has dropped significantly to a third (34%) who now think prices will go down in the next 12 months, with almost one in four (23%) thinking house prices will rise over the next year.

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