Britain’s housing market slowed further in August in the face of high mortgage rates, with sales falling to levels not seen since people were confined to their homes in the early stage of the pandemic, a survey found.
(Bloomberg) — Britain’s housing market slowed further in August in the face of high mortgage rates, with sales falling to levels not seen since people were confined to their homes in the early stage of the pandemic, a survey found.
The Royal Institution of Chartered Surveyors also said almost every region is now experiencing “relatively steep” falls in house prices, with a key index deeper in negative territory than at any time since 2009 and agents predicting the downturn will worsen in the coming months.
The report underscores the growing toll being taken by the steep rise in interest rates delivered by the Bank of England in its bid to tame inflation.
Mortgage rates have hit their highest since 2008, leaving an increasing number of households struggling to service their loans as they grapple with the spiraling cost of food and basic goods. Millions more will feel the squeeze by the end of next year as fixed-rate deals expire and they are forced to refinance at significantly higher rates.
“Prices are continuing to slip, albeit that the relatively modest fall to date needs to be seen in the context of the substantial rise recorded during the pandemic period,” said Simon Rubinsohn, chief economist at RICS. “Critically, affordability metrics still remain stretched in many parts of the country.”
Buyer demand and agreed sales continued to fall sharply against a backdrop of “economic uncertainty and the high cost of mortgage finance.”
Meanwhile, an index of house prices slumped by 13 percentage points to minus 68. The West Midlands, East Midlands, East Anglia and the South East of England all exhibited “particularly negative feedback.” Northern Ireland was the only region still in positive territory.
In the rental market, high borrowing costs both increased demand from tenants unable to get a mortgage and forced more landlords to leave the sector. As a result of the widening mismatch, lettings agents overwhelmingly expect rents to be driven higher over the coming three months.
The findings echo a survey by real estate investment firm Castleforge, which found that a third of tenants in the UK are struggling to afford their rent. In London, that figure rises to almost half. A large proportion of this is down to landlords passing on increased borrowing costs to their tenants.
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