What this week's UK economic turmoil means for the housing market
Liam Bailey, global head of research is joined by Flora Harley of Knight Frank Research and Andrew Wishart of Capital Economics.
1 minute to read
The UK economy has taken a number of blows since the mini-budget was announced on 23rd September.
Markets were clearly wary of the fiscal policy announcement as the value of the pound plunged against the dollar, opening the door for significant savings for US buyers in the UK housing market.
Mortgage affordability squeezed
With the Bank of England opting for a 50bps rate hike, bringing their base rite to 2.25%, combined with interest rates expecting to rise further during the economic turmoil, lenders were spooked and began to pull their mortgage products.
In the UK since the start of the year, when factoring in price growth and interest rate changes, by the end of August the average mortgage payment will have risen around 34% or £260, as mortgage affordability is squeezed further.
This brings the proportion of income spent on mortgages to 39%, a level not seen since 2008 but still well below the 50% seen in 2007. With mortgage offers in place for a number of months this will likely have a lagged effect.
House prices
The market turmoil is likely to have an impact on UK house prices as the cost of borrowing continues to rise and demand slows. However, house prices rose 23% since the start of the pandemic, so even if they declined 10% in 2023, this would take us back to where we were last summer.
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