The housing market is “relatively stable” despite the fact that many people still struggle to buy their first home.
According to Nationwide, Britain’s third largest mortgage lender, the average house price has increased by 2.1% compared to this time last.
This is the biggest increase year-on-year since December 2022. Kwasi and Liz Truss “mini-budget” shocked the financial markets and sent borrowing costs spiralling. The property market was almost immediately impacted by the downturn.
Nationwide estimates that prices rose by 0.3 percent in June.
The economists’ expectations were slightly exceeded in both readings – the monthly change and the rate of inflation on an annual basis. Forecasts had predicted a monthly increase of 0.1 percent and a year-over-year rise of 1.8 percent.
Estate agents say that this election has not had much of an impact on their business.
Many people think this is because so many people who wanted to move delayed it for a couple of years, and then decided to go ahead anyway. Some people suggested that because Labour was always the favourite to win this election, there was less unpredictability.
Robert Gardner, Nationwide’s chief economist said that the housing market has been relatively stable in recent months. The number of mortgages for home purchase approvals is around 60,000 each month.
While it’s still about 10 percent below the previous level, the pace is still respectable, especially in light of the current higher interest rates.
Data from Nationwide shows that in 2019, the average mortgage rate for someone who has a 25% deposit and a fixed five-year deal was around 1.9%. It is currently around 4.6 percent, but that’s down from over 6 percent last summer.
Gardner stated that “affordability is still stretched for many potential buyers” even though rates have eased from their peak.
The average UK salary of a first-time home buyer is about £37 per month. This compares to a monthly mortgage of 28 per cent prior to the pandemic, and the long-term average of 30%.
Recent declines in mortgage rates reflect the growing expectation that interest rates will be cut soon. The financial markets believe that the Bank of England is likely to cut interest rates at its next meeting, which will be in September, if it doesn’t happen later today.
Gardner believes that further rate cuts will be expected in the coming year or two. However, he thinks they will only have a “modest” impact on mortgage interest rates because many lenders already factored these expectations into their pricing.
Gardner stated that “as a consequence, affordability will likely improve only slowly through a combination between wage growth exceeding house price growth which is expected remain relatively flat with some support coming from modestly reduced borrowing costs.”
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