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Mortgage affordability still a barrier as housing sentiment falls

Mortgage affordability still a barrier as housing sentiment falls
Shekina Tuahene
Written By:
Shekina Tuahene
Posted:
20/06/2024
Updated:
20/06/2024

House prices and mortgage costs are still too high for many prospective home buyers, a study from a trade association has found.

Over half – 56% – of people felt the deposit needed to buy a home was too high, according to the Building Societies Association’s (BSA’s) Property Tracker report for June. This rose to 63% among first-time buyers. 

When asked what the main barrier to buying a home was, the cost of monthly mortgage payments was a worry to 68% of the survey’s respondents, higher than the 62% who felt this way in March. 

Some 65% said raising a deposit was the main barrier, up from 60% previously. 

Despite the concerns among prospective buyers, mortgage arrears levels are still relatively low across homeowners. 

The majority of respondents paying a mortgage – 88% – said they were not worried about keeping up with payments. 

Just a tenth felt unconfident about this, slightly higher than the 8% who said the same in March. 

House prices expected to rise 

Some 45% of people expect house prices to rise over the next 12 months, up from 41% who predicted this in March and 23% this time last year. 

The BSA said that if prices did rise, this would continue to put pressure on future first-time buyers’ ability to raise a deposit. 

Waiting on the MPC 

The association said that with mortgage rates still high, homeowners and prospective homeowners were hoping for the Monetary Policy Committee (MPC) to reduce the base rate. 

Paul Broadhead, head of mortgage and housing policy at the BSA, said: “It’s unsurprising that housing market sentiment has declined this month, as mortgage affordability continues to be a significant barrier to buying and owning a home. Borrowers will be disappointed that the bank rate is expected to remain unchanged today, as a cut would have provided a little much-needed optimism to homeowners and first-time buyers. 

“Whilst it is pleasing to see the main political parties recognising the struggles of homebuyers, particularly first-time buyers, in their manifestos, it will take more than short-term Government schemes to fix our broken housing market.”

He added: “The new Government must commit to working with lenders, regulators, the wider housing market industry, and the public to make homes more affordable, more available, and more appropriate to the needs of those living in them and the world we live in. 

“In our first-time buyer report Age-old problems, modern solutions: A roadmap for change, we identified potential long-term solutions that would support not only today’s first-time buyers, but [that] won’t fail future generations of homebuyers. We hope whichever party is leading Government on 5 July will commit to new and radical solutions to support the UK housing market.”