Homeowners anxiously wait for the MPC announcement as housing market sentiment declines

Homeowners anxiously wait for the MPC announcement as the housing market sentiment declines, according to the June Property Tracker Report from the Building Societies Association (BSA).

Key points from publication:
    • Majority think the size of deposit now required to buy a home is too high 
    • Monthly mortgage costs and raising the deposit are main barriers to buying a home
    • Fewer than one in five people think now is a good time to buy a home

Affordability concerns increase

The cost-of-living pressures are easing for some households due to lower inflation and strong wage growth, however for many, high house prices and mortgage rates are adding to affordability pressures on first-time buyers and those looking to re-mortgage or move home.

The June Property Tracker report from the BSA reveals that more than half (56%) of people think the deposit required to buy a home is too high. For first-time buyers this increases to 63%. This is unsurprising considering a typical first-time buyer now needs a deposit of around £60,000, a whopping 160% higher than the average £23,000 required in 2005*. Wages have grown by less than half this amount in the same period**. 

The report shows that the affordability of monthly mortgage repayments is a growing barrier to buying a home, with 68% citing this, an increase from 62% in March. A similar number (65%) find raising a deposit is an obstacle, up from 60% in March. 

Homeowners and aspiring homeowners will be keenly waiting for the MPC announcement on the Bank Rate later today. Earlier this year many were expecting a cut to the rate this summer, but this is now looking unlikely, as some measures of inflation remain higher than expected. This could mean that mortgage affordability does not start to ease, as had been anticipated.

Mortgage arrears levels have so far remained low and the majority of people (88%) did not express that they were concerned about keeping up with their mortgage payments. However, a small minority are not confident about making their mortgage payments over the next six months. In total 10% said they were not confident, which is similar to the 8% March.

House prices

An increasing number of people think house prices will rise over in the next 12 months – 45% compared to 41% in March and just 23% in June 2023. Rising house prices, especially when they outstrip wage growth, is likely to increase the already significant burden of raising a deposit for first-time homebuyers.

Commenting on the findings, Paul Broadhead, Head of Mortgage and Housing Policy at the BSA, said:

“It’s unsurprising that housing market sentiment has declined this month, as mortgage affordability continues to be a significant barrier to buying and owning a home.

“Borrowers will be disappointed that the Bank Rate is expected to remain unchanged today, as a cut would have provided a little much-needed optimism to homeowners and first-time buyers.

“Whilst it is pleasing to see the main political parties recognising the struggles of homebuyers, particularly first-time buyers, in their manifestos, it will take more than short-term government schemes to fix our broken housing market. 

“The new government must commit to working with lenders, regulators, the wider housing market industry, and the public to make homes more affordable, more available, and more appropriate to the needs of those living in them and the world we live in.

“In our first-time buyer report – Age-old problems, modern solutions: A roadmap for change – we identified potential long-term solutions that would support not only today’s first-time buyers, but which won’t fail future generations of homebuyers.

“We hope whichever party is leading government on the 5th July will commit to new and radical solutions to support the UK housing market.”

 

Sources:
*BSA First-time buyer report – Age-old problems, modern solutions: A roadmap for change – April 2024
** ONS Average Weekly Earnings, Total Pay, series KAB9. 2005 versus 2023.

 

Kindly shared by Building Societies Association (BSA)