Housing market sentiment declines as affordability barriers continue: BSA – Mortgage Strategy

High house prices and mortgage rates are adding to affordability pressures on first-time buyers (FTBs) and those looking to re-mortgage or move home, the latest report from the Building Societies Association (BSA) reveals.

While the cost of living pressures are easing for some households due to lower inflation and strong wage growth, the BSA’s June property tracker report finds that 56% of people think the deposit required to buy a home is too high with this figure increasing to 63% for FTBs.

A typical FTB now needs a deposit of around £60,000, which is an increase of 160% from the average £23,000 required in 2005.

Meanwhile, 68% cite that the affordability of monthly mortgage repayments is a growing barrier to buying a home, an increase from 62% in March.

A similar number (65%) find raising a deposit is an obstacle, up from 60% in March.

While earlier this year many expected a cut to the base rate this summer, BSA suggests this is now “looking unlikely”. The BoE is scheduled to make its next announcement today.

BSA says this could mean that mortgage affordability does not start to ease, as had been anticipated.

Mortgage arrears levels have so far remained low and the majority of people (88%) did not express that they were concerned about keeping up with their mortgage payments.

However, a small minority are not confident about making their mortgage payments over the next six months.

In total 10% said they were not confident, which is similar to the 8% in March.

An increasing number of people think house prices will rise over the next 12 months – 45% compared to 41% in March and just 23% in June 2023.

BSA head of mortgage and housing policy Paul Broadhead says: “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 FTBs.”

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

“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.”