The UK housing market continued to fall in August following a drop in demand for property due to the cost of mortgage loans. In fact, the decline reached 5.3%, making it the fastest since 2009. Thus, the rate hikes seem to bring the country closer to the 10% decline forecast by experts, according to data from Bloomberg.
As a result, the fall is expected to continue to intensify in the second half of the year, something that is already worrying landlords, who have been recording rises for a decade. In this way, the rental stock is also being affected by owners who are deciding to sell their properties.
The intense fight against inflation is increasing the pressure on the pockets of the British, who still have to bear loans with much higher costs than those existing a year earlier, despite the fact that mortgage interest rates are beginning to relax. Not surprisingly, property prices peaked in August 2022, after which they have fallen in ten of the twelve months of the year, due to the drop in demand caused by rises in energy and food costs.
Furthermore, mortgage repayments have risen to the point where they now account for 28% of a typical family’s total income, compared to 20% over the last decade. This has caused home sales to fall by 20% compared to 2019 data and by up to 40% compared to 2021. Likewise, mortgage purchases fell by 30% compared to pre-pandemic data.
Despite these discouraging data, monetary tightening in the country could be coming to an end. This has been announced by the Bank of England’s chief economist, Huw Pill, who has also warned that it is difficult for interest rates, at 5.25%, to come down soon after continuing to record inflation three times above target.
Meanwhile, the data indicate that one in three homeowners is having to make an extra effort to make their personal finances healthy in anticipation of a sharp rise in their interest rates when their current fixed-rate mortgage contracts come to an end, something that has meant that many have not yet felt the impact of the rate rises.