Cold feet in a heatwave: new low for those who think it’s a good time to buy property

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on release of the BSA’s property tracker, showing a new low for those who think it’s a good time to buy property.

Key points from release:

Only 16% of people think this is a good time to buy a home – the lowest level since the property tracker started in 2008. Meanwhile, 39% don’t think it’s a good time and the rest are unsure.
The main reasons people said now is a bad time to buy are that house prices are so high (73%), followed by the fact that interest rates are rising (70%) and we’re suffering from high inflation (70%).
The main barriers to buying are raising a deposit (62%), and affording the mortgage (53%). The number of people put off by mortgage costs is growing.
One in four non-home owners (24%) aren’t confident they can afford their rent. This is up from 17% in March. By contrast, 6% of homeowners are worried about paying the mortgage – partly because so many of them are protected by fixed rates.

Sarah Coles says:

“Property buyers are getting cold feet in a heatwave. Higher house prices, runaway bills and rising rates have cooled their passion for property, and the vast majority aren’t convinced that now is a good time to buy. Meanwhile, higher prices are causing huge headaches for renters, and while those with fixed rate mortgages are protected for now, they can expect real pain when they come to remortgage.

“Property prices are a victim of their own success. Among those who said they didn’t fancy buying right now, almost three quarters have been put off by the enormous expense. Pressures building in the economy are taking a toll too, with seven in ten put off by inflation, and the same number worried by rising interest rates.

“This reflects the RICS report, which showed that buyers were starting to get more cautious. While estate agents still have several times more buyers than sellers on their books, there’s a growing risk that these won’t translate into sales. Cold feet tend to be contagious, so as more buyers pull out, we may well see sales ease off and property prices slow.”

Rising costs:

“Rising prices are hitting renters hard, particularly those who’ve renewed their tenancies in recent months, who’ve seen their costs climb at an alarming speed. Higher rents, coupled with a massive hike in the cost of everything else, means one in four aren’t sure they’ll be able to afford to keep a roof over their head in the next six months.

“Three quarters of homeowners with mortgages are protected, for now, by fixed rate mortgages, which is why only around one in 20 are worried about paying their mortgage at the moment. That’s likely to include many of the 2 million people on variable rate mortgages, and those who are coming up for a remortgage.

“Because while fixed rate mortgages protect many homeowners for now, they’re storing up problems for when they have to remortgage. We haven’t seen rates rise this far over such a short period for over 30 years, and remortgagers will face all these rises in one fell swoop.

“The good news is that at the moment, banks have so much lockdown savings swilling around that they aren’t passing on the full extent of the rate rise into their new fixed rate mortgages, particularly when it comes to five-year fixed deals. According to Moneyfacts, the average two-year fixed rate is up 0.74 percentage points to 3.03% since November and the average five-year deal is up 0.58 percentage points to 3.17% – at a time when the Bank of England rate is up 0.9 percentage points.

“It means anyone with six months or less to run on their mortgage should consider locking in a new fixed rate now, to protect themselves from any further rate rises. The gap between two-year and five-year fixed rates is so narrow, that if it makes sense for your circumstances it’s well worth considering fixing for longer, and locking in that certainty for a longer period. Anyone with further to go needs to start considering now how they’re going to manage when their mortgage payments increase.”

Other figures from the release:

Higher energy costs are our biggest worry (73%), followed by food costs (66%), other rising costs (52%), being able to save for the future (32%) and rising interest rates (21%).
Only 12% of people aren’t having to cut costs right now. 54% are cutting energy use, 51% cutting back on non-essentials, 42% shopping around, 31% cutting back on essentials, 20% putting off bigger purchases, and 17% taking fewer journeys.
21% are using savings to cover higher costs, but only 6% are borrowing on things like credit cards.

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay