Recent market analysis by Savills estate and letting agents suggests that new buyers and home movers are significantly reducing their property budgets because of the rising cost of living, increasing interest rates, tougher mortgage affordability rules, and spiralling property prices.
Savills have said that buyers who rely heavily on mortgages i.e. people with lower deposits are reducing their budgets when looking for a new home to try and combat high mortgage interest payments. Over the last few months lender after lender have been following in suit by raising their rates on a pretty much daily basis. This is a direct domino effect from rising inflation, subsequent raising of the Bank of England base rate to tackle inflation, and the rising cost of living.
As well as people reducing their budget, a survey carried out by Savills of more than 1,000 new buyers showed that commitment to moving home has also fallen. The net balance of people who are more committed to moving in the next three months has fallen to -1.7%, while a net balance of +7.1% is more committed to moving in the next year compared to +22% in April 2022.
What Have Savills Said?
Associate Director at Savills Frances McDonald has commented:
“Despite transactions remaining robust over the summer months, there’s now certainly less urgency in the market, with rising costs of debt impinging on the budgets of those most reliant on a mortgage. Increased costs of living are also making buyers much more conscious when it comes to how much they are willing to spend. Ultimately, in the short term, the market will be predominately driven by home owner need, rather than lifestyle influences which drove the market during the pandemic. Especially now that lockdowns are fading into distant memory.
As a result, after more than two years of runaway house price growth, sellers will need to become much more realistic when it comes to pricing their home, especially as more stock comes onto the market. As and when inflation has been tamed, the cost of debt eases and we see a pick-up in both domestic and global economic growth, we can expect price growth to return to these markets, particularly given the strength of buyers’ underlying commitment to move over the medium term.”
What Do The Mortgage Experts Say?
Content and Communications manager at Oportfolio Mortgages in Southwest London, Louis Mason comments:
“Although we haven’t yet seen our clients significantly reducing their property budgets, we are certainly seeing a reduction in the amount of people entering the mortgage market by buying a new property. Don’t get me wrong, the appetite for buying is still very much present but there is definitely a noticeable reluctance from some clients who would normally be chomping at the bit to buy.
Unfortunately, we think that until inflation is under control again and interest rates start to go down, this reluctance will only continue and not only will buyers be reducing their budgets, but sellers will also struggle to sell.”
If you or anyone you know is thinking of buying a property but are not sure of where you should set your budget, feel free to give our advisors a call today to discuss your options. We are here to help!