Press release

Housing market sentiment declines and people cut back on essentials as the rising cost of living starts to bite

BSA Property Tracker
  • Fewer people think now is a good time to buy than they did in the 2008 financial crisis

  • Mortgage affordability is a growing barrier to buying a home

  • A third expect to cut back on essential purchases as the cost of living rises

  • First-time buyers expect to work more to cover the rising cost of living

The latest Property Tracker Report from the Building Societies Association (BSA), provides an insight into how the cocktail of double-digit house price growth, rising interest rates, the escalating cost of living and the Russian invasion of Ukraine is impacting consumers.

The data reveals that just 18% of people think now is a good time to buy a property. This is the lowest figure seen since the Report began at the height of the financial crisis in 2008.

It also highlights that almost half of people (48%) say affordability of monthly mortgage repayments is a barrier to buying a property, a significant increase from 39% just three months ago.

Rising Cost of Living

Consumers have been experiencing price rises for some time. However, many are aware that there is more pressure to come as the energy price cap increases next month and higher national insurance payments will come in to effect at the same time.

It’s therefore not surprising that 65% said they are worried about the rising price of goods and services over the next six months and many are taking action. Nearly half (48%) said they will cut their energy use and the same proportion (48%) say they will spend less on purchases they consider non-essential because their cost of living has increased.

More worryingly a third of people (33%) say will be spending less on essential purchases, such as food. And of those trying to buy their first home, one in three (30%) say they will work more hours or find a new job over the next six months because their cost of living has increased.

Almost one in five people (17%) will be depending on savings to cover the increase in living costs, while 41% will be shopping around to save money.

After two years of living with the Covid-19 pandemic, it’s probably not surprising that just one in five people (21%) are considering postponing a holiday to help cover the increasing living costs.

Mortgage Payments

It’s encouraging that the majority of those with an existing mortgage (90%) say they are confident they will be able to meet their regular mortgage payments over the next six months (92% - Mar 21), compared to less than 2 in a 100 (1.8%) who are not at all confident (1.2% - Mar 21).  This is probably due to 81% of all UK mortgages being on a fixed rate1 and therefore protected, for a period, from rising interest rates. 

It’s a different story for those trying to get a foot on the housing ladder, with mortgage payments as a share of take-home pay higher now than the long-run average2, despite relatively low mortgage interest rates. Raising a deposit continues to be the biggest barrier to buying a home with 59% citing this, an increase from 55% in December.

House Prices

Despite the significant growth in house prices in the last 12 months, 48% think prices will continue to rise over the next year (45% - Dec 21).  Some, however, expect future house prices to fall, with 12% thinking this is likely in the next 12 months (13% - Dec 21). Around one in seven people (14%) said concerns about future falls in house prices was a barrier to buying a property.

Commenting on the findings, Paul Broadhead, Head of Mortgage and Housing Policy at the BSA said:

“The Property Tracker Report is a useful temperature check on how consumers are feeling about the property market.  It’s good to see that despite being in a rising interest rate environment, the majority of mortgage holders remain confident that they will be able to continue to make their mortgage payments.

“However, the increase in the number of people citing mortgage affordability as a barrier to buying a home is likely to continue if we continue to see high demand and low supply in the housing market. Price growth at the current pace is clearly unsustainable and a much higher volume of new build and resale homes coming to market is needed to change this dynamic.  Whilst lenders expect some flattening of new mortgage demand as the year progresses, we anticipate that the re-mortgage market will remain buoyant.

 “As we all experience the impact of the rising cost of living, and watch the how the Russian invasion of Ukraine and the consequent sanctions is affecting energy prices, it’s not surprising that many are feeling worried about making their budgets stretch and considering changes they can make.

“During the pandemic overall savings balances increased by almost £300 billion so it is not surprising that some people are now planning to use this buffer to help cover their increased costs. 

“The growth in savings balances was not however evenly distributed, and there are many households who struggled financially during the pandemic. The FCA’s Financial Lives Survey3 showed one in eight adults (13%) have no savings whatsoever and a further one in three (32%) have less than £2,000. For these families and individuals spending less on energy, food and fuel may not be enough and we hope the Chancellor will announce additional support for these households, as currently their outlook is very troubling.”

1 https://www.bankofengland.co.uk/statistics/mortgage-lenders-and-administrators/2021/2021-q4

2 https://www.nationwidehousepriceindex.co.uk/reports/house-price-growth-makes-a-strong-start-to-2022

3 https://www.fca.org.uk/publication/research/financial-lives-survey-2020.pdf

Research findings:

Notes to Editors:

  1. Paul Broadhead, Head of Mortgage and Housing Policy at the BSA is available for interview.  Please contact Tanya Jackson or Katie Wise to arrange.
  2. The Building Societies Association (BSA) represents all 43 UK building societies, as well as 6 credit unions. Building societies have total assets of over £477 billion and, together with their subsidiaries, hold residential mortgages over £351 billion, 23% of the total outstanding in the UK. They hold over £328 billion of retail deposits, accounting for 18% of all such deposits in the UK. Building societies account for 40% of all cash ISA balances. They employ approximately 43,000 full and part-time staff and operate through approximately 1,380 branches.
  3. For the March Property Tracker survey fieldwork was undertaken between 3-4 March 2022. Total sample size was 2,271 adults. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+). All figures, unless otherwise stated, are from YouGov Plc.
  4. Results calculated by the BSA using YouGov data.
  5. Those likely to buy are existing home owners as well as people who say that they are looking to buy their first home, or return to the market having previously owned, and who also say they are likely to move in the next six months.
  6. The full Property Tracker Report can be downloaded here.
  7. Respondents were given the option to select up to three’ barriers’ when asked what they think are most likely to stop someone from buying a residential property at the moment.

Press contacts:

Tanya Jackson, External Affairs, Tel: 07881 501098 tanya.jackson@bsa.org.uk

Katie Wise, External Affairs Officer, Tel: 020 7520 5904, katie.wise@bsa.org.uk

Contact

Katie Wise

Policy & External Affairs Officer

Tel: 0207 520 5904 katie.wise@bsa.org.uk

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