Momentum has demonstrated a voracious appetite for homeownership
“The forward momentum generated throughout the housing market during the heights of the pandemic and beyond has been nothing short of remarkable,” believes Craig Calder (pictured), director of mortgages at Barclays.
This has been evidenced by the recently released Bank of England Money and Credit statistics, which showed that net borrowing of mortgage debt by individuals increased to £7 billion in March, up from £4.6 billion in February. A further example of the momentum continued by the housing market; this figure remains above the pre-pandemic average of £4.3 billion in the 12 months up to February 2020.
The Bank of England data also revealed that gross lending rose to £26.5 billion in March from £26.0 billion in February, while gross repayments fell to £19.7 billion in March from £21.0 billion in February.
Calder believes this has demonstrated a voracious appetite for homeownership across the UK, an appetite which he believes is unlikely to fade anytime soon.
Read more: Bank of England releases latest mortgage figures
While Calder believes the statistics outline the forward momentum that has been generated, he noted that the market is, nonetheless, in a difficult and uncertain economic climate.
“It would take a braver person than me to speculate on exactly where house prices may sit in, say, 12 months’ time,” he added.
According to the Nationwide House Price Index, annual house price growth in the UK slowed to 12.1% in April, down from 14.3% in March. This is the smallest house price growth in five months, and Nationwide believe it is a reflection of falling consumer confidence amid growing economic uncertainty.
It is believed that energy bills will increase 14 times faster than wages over the course of 2022. On top of this, CPI rose by 7% in March, up from 6.2% in February, representing the highest inflation rate for 30 years. There is also the war between Russia and Ukraine, which has resulted in gas shortages, further fuelling utility bills increases.
“What we do know is that rising living costs are influencing affordability for some borrowers, although this may be reduced at the higher end of the market which may lessen the impact on some areas of the London market and other prime city locations,” Calder said.
With the intention of assisting affordability, the Bank of England’s Financial Policy Committee has said that it will consult on withdrawing its affordability test for new mortgages in the first half of 2022. According to the Bank, its requirement for most mortgages to be no more than 4.5 times a borrower’s income, plus separate affordability rules from the Financial Conduct Authority (FCA), are sufficient.
It believes that a lower long-term outlook for interest rates does not automatically mean smaller risks for borrowers, as it partly reflected weaker prospects for incomes and meant there was less scope for borrowing costs to fall in a downturn.
Another issue, according to Calder, is that demand far outweighs supply which, in the simplest economic terms, means that prices are likely to remain strong in many areas.
According to Zoopla, while the imbalance between buyer demand and supply is not going to unwind in the near term, the recovery in the levels of new supply is gathering momentum. In January and February, new listings were up in every part of the country compared to 2021 as more movers, and landlords, listed their homes for sale.
Read more: What’s happening with the supply of homes for sale in the UK?
The flow of the new supply of homes in the past month rose by 5% compared to its five-year average.
Calder went on to say that he believes the mortgage market will also continue to play an important role.
“Despite successive interest rate rises, many borrowers still have access to some highly competitive fixed rates to secure at least one major monthly outgoing,” he added.
“We are expecting to see some pressure being placed on these rates but we are operating from a robust lending platform, which should add a layer of confidence to the overall housing market going forward,” Calder concluded.
