First-time buyers deserted the UK housing market in the second quarter after a surge in mortgage costs prevented many from getting a foot on the property ladder.
(Bloomberg) — First-time buyers deserted the UK housing market in the second quarter after a surge in mortgage costs prevented many from getting a foot on the property ladder.
The banking industry group UK Finance said loans for first-time buyers slumped 28% compared to the same period a year ago, a slowdown it blamed on deteriorating affordability and turmoil in markets.
It was lowest number of first-time buyer loans for the second quarter in a decade, aside from the period in 2020 when Covid lockdowns distorted data. Home-mover purchases fell 30% from a year ago.
The figures added to evidence showing the housing market is cooling in the face of surging mortgage costs, with subdued demand expected to drag house prices lower.
While mortgage rates are beginning to edge lower, borrowing costs for households remain far higher than they were a year ago. Many potential buyers priced out of the property market are also facing rocketing rental costs, compounding the cost-of-living crisis.
“Around 700,000 borrowers have come off their fixed rate deal in the first half of this year and likely found themselves on a much higher rate,” said Eric Leenders, managing director of personal finance at UK Finance. However, he said this is “largely affordable because of the “stress tests” applied when the mortgage was originally taken out.”
Mortgage costs have been sent soaring by the Bank of England’s action to stamp out painfully high inflation but markets wager that it is nearing an end to its interest rate hikes. Rightmove said the average two-year fixed mortgage rate was 6.40% last week, up from 3.77% a year ago.
UK Finance’s data also revealed that households are increasingly locking up their savings in time deposits over easy access accounts to take advantage of higher interest rates with overall savings dipping.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.