"There is also an expectation that if inflation continues to fall, the Bank Rate may be cut this year, further easing pressures on borrowers and increasing mortgage affordability."
- Paul Broadhead, head of mortgage and housing policy at the BSA
The latest research from the Building Societies Association (BSA) shows a "significant reduction" in the number of homeowners concerned about paying their mortgage along with a decrease in those that see mortgage affordability as a barrier to home buying.
Last Autumn, Bank Rate had just risen to 5.25% and there was concern it could go higher. However, the next move in Bank Rate is now expected to be a cut, and this shift in expectations has been reflected in swap and mortgage rates. While some lenders have recently announced increases in mortgage rates as market expectations adapt, they remain below the levels of last year.
Whilst affording a mortgage remains the biggest barrier to buying a home, it has fallen significantly to 62% in March, from 71% six months ago in September 2023.
When homeowners were asked how confident they are about paying their mortgage over the next six months, 9% said that they are either not very confident or not at all confident, a reduction from 12% in December 2023, and the lowest level for almost two years. This is despite recent data showing a slight increase in mortgage arrears in the final quarter of last year.
The majority of people asked did not express any concerns about keeping up with their mortgage payments, with 90% of mortgage borrowers confident they will keep up with payments, an increase from 85% in December 2023.
Those who rent their home are a little less assured with three-quarters (74%) confident about meeting their monthly payments. However, this is the highest confidence score since March 2022, with a corresponding reduction in those not confident, to 18% (from 20% in December).
Barriers to homeownership
The report shows that concerns about future falls in property prices has decreased as a barrier to buying a residential property, from 18% to 12%. This is the lowest level it has been for eight years.
Raising a deposit remains a significant barrier to buying a home, with 60% of people citing this as a reason, virtually unchanged since December.
Housing market sentiment
41% of people think house prices will rise over the next 12 months, a significant increase from 33% in December 2023. This is the highest proportion expecting a price rise since June 2022. There was a corresponding shift in those who think house prices will fall in the next year, with only 14% believing this to be the case, compared to 24% in December.
Sentiment in the housing market remains weak but has improved since December 2023. The proportion of people who think now is a good time to buy a property is 19% compared to 16% in December, the highest it has been since December 2021.
36% of people disagreed, meaning they do not think now a good time to buy a new home, a considerable drop from December 2023 (41%).
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “The overall reduction in mortgage rates following the peak in 2023 has been welcomed by homebuyers, and has seen an improvement in confidence in the housing market.
“While consumer prices remain high, wage growth has been strong meaning many households are now in a stronger position than six months ago. There is also an expectation that if inflation continues to fall, the Bank Rate may be cut this year, further easing pressures on borrowers and increasing mortgage affordability.
“Whilst affordability of mortgage payments remains the biggest barrier to house purchase, it is reassuring that this has reduced over the past six months. Expectations around house prices reflect this more stable outlook for the housing market."
