Finance

FTBs left housing market in Q2 after mortgage rates soar

Mortgages

UK Finance said loans for FTBs plunged 28 per cent compared with the same period a year back, a decline it blamed on worsening affordability and tumult in markets

First-time buyers left the UK housing market in the second quarter after a jump in mortgage costs prevented many from getting a foot on the property ladder.

The banking industry group UK Finance said loans for FTBs plunged 28 per cent compared with the same period a year back, a decline it blamed on worsening affordability and tumult in markets.

It was lowest number of FTB loans for the second quarter in ten years, apart from the period in 2020 when Covid lockdowns distorted figures. Home-mover purchases dropped 30 per cent from a year ago.

The figures added to proof showing the housing market is cooling in the face of soaring mortgage costs, with muted demand expected to bring house prices down.

While mortgage rates are beginning to come down, borrowing costs for households stay much higher than they were a year back. Many potential buyers priced out of the property market are also facing soaring rental costs, aggravating the cost-of-living crisis.

Nearly 700,000 borrowers have come off their fixed rate deal in the first half of this year and likely found themselves on a much higher rate, said Eric Leenders, MD of personal finance at UK Finance. Nevertheless, he said this is largely affordable as the “stress tests” applied when the mortgage was originally taken out.”

Mortgage costs have been sent soaring by the BoE’s action to stamp out painfully high inflation but markets speculate that it is nearing an end to its interest rate hikes. Rightmove said the average two-year fixed mortgage rate was 6.40 per cent last week, up from 3.77 per cent a year back.

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