Confidence in the real estate market near rock bottom says building societies

A new report reveals that confidence in the housing market is near rock bottom as buyers think it is not the right time to make a property purchase.

A combination of soaring home prices, rising mortgage rates, a rapid increase in the basic cost of living, and political turmoil has led to this situation, according to a report by the Building Societies Association.

Only 14 percent of those surveyed think now is a good time to buy a property – compared to 47 percent who think it’s not a good time, giving a net rating of -33 percent.

It is one of the lowest levels of confidence the association has seen since it began its records nearly 15 years ago.

A new report says rising house prices, rising mortgage rates, a rapid increase in the basic cost of living and political unrest have dampened confidence in the real estate market.

Opinions about whether now is the right time to buy differ across the country, with one in five – 19 per cent – in London believing now is a good time to buy.

It compares to about half that number – at 8 per cent – in Yorkshire and the Humber, and 10 per cent in the North East.

There has also been a significant shift in the number of people who believe home prices will fall in the next 12 months compared to the last quarter.

The numbers increased from 35 per cent in September to nearly half this month – up 49 per cent.

Only 16 percent thought home prices would rise, compared to nearly double that number at 31 percent three months earlier. And 9 percent are now worried about depreciating home values.

The study showed that the biggest obstacle to buying a property is the ability to afford the costs of mortgage payments.

Mortgage rates have increased in the wake of several hikes in interest rates by the Bank of England, which are now at 3.5 percent

Two-thirds of people cite this as a hindrance, with 53 percent saying concerns about raising a deposit were holding them back.

Access to a large enough mortgage is the third biggest constraint, and was chosen by almost half of the respondents.

Borrowers can check the cost of their mortgage now based on the loan size and home value, with the best mortgage rates calculator.

Mortgage rates have increased in the wake of several hikes in interest rates by the Bank of England, which are now at 3.5 percent

Mortgage rates have increased in the wake of several hikes in interest rates by the Bank of England, which are now at 3.5 percent

Asked what worries people over the next six months, one in seven said rising energy prices and 63 percent said rising food costs.

Homeowners were more concerned about rising energy prices — at 73 percent — than those without homeowners — at 66 percent.

When asked about the affordability of a mortgage or monthly rent payments over the next six months, the vast majority — 87 percent — of mortgage borrowers have no interest in keeping up with their mortgage payments.

However, renters are less confident, with about a quarter – that’s 23 per cent – worried about covering housing costs.

It comes at a time when the latest data shows that home prices are starting to fall.

Halifax said UK house prices fell 2.3% between October and November

Halifax said UK house prices fell 2.3% between October and November

Earlier this month, Halifax reported that annual house price growth slowed dramatically in November to just 4.7 percent, down from 8.2 percent in the 12 months through October.

House prices also fell monthly by 2.3 percent, compared to 0.4 percent last month, according to Halifax. The change means the average house price in Britain is now £285,579, down £6,827 from £292,406 last month.

Paul Broadhead, of BSA, said: ‘While many measures of house prices now show a slight decline in prices, the significant increases over the past two years, combined with the escalating cost of food, fuel and energy, mean the affordability of a mortgage for those who wish to purchase. The drug is probably more difficult now than it was 12 months ago.

“I expect that this, and the deposit increase, will remain major obstacles to home ownership for some time to come, with the possibility that many will have to reduce their ambitions for the property they can consider purchasing.”

Could house prices drop 20%?

The mortgage crisis halted the real estate pandemic and sent house prices down, but can they drop 20 percent?

Harry Hill, founder of Rightmove and an expert on the real estate market, pointed out the dangers of a sharp drop in house prices of this magnitude.

This week Georgie Frost and Simon Lambert discuss the housing market outlook, how rapidly rising mortgage rates are affecting it and what potential home movers or first time buyers should do.

Hit play to listen to the episode on the player above, or listen (please subscribe and review us if you like the podcast) on Apple Podcasts, Audioboom, YouTube, Spotify, or visit the This is Money Podcast page.

Broadhead added: “It is encouraging that nearly nine in ten homeowners do not express concern about keeping up with their mortgage payments, and we have not yet seen an increase in borrowers who are in mortgage arrears.

This is likely because about 80 percent of them are based on fixed rates which means that it will take time for many to feel the higher mortgage costs. This will not be the case for renters, and so it is not surprising that they are less confident about covering their housing costs.

While indications point to declining confidence in the housing market, there is no “one market” and the effects will be felt differently depending on one’s circumstances, whether regional or personal.

Overall, there is still an imbalance between property supply and demand in most areas of the UK, which I expect will keep the market moving, albeit at a slower pace than we’ve seen recently.

Finally, it should be noted that lenders are sensitive to the growing number of people facing family budget pressures and have well-trained and experienced teams in providing customized support to those who are struggling.

So anyone who is concerned about their finances and their ability to pay off a mortgage should contact their lender or debt counselor as soon as possible. They will provide a safe space for confidential, non-judgmental conversation and will do everything possible to assist each borrower with choices based on their personal circumstances.

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