The UK housing market has shown unexpected resilience this summer, buoyed by recent changes to mortgage affordability rules that have eased borrowing conditions for buyers. Traditionally, the summer months see a slowdown in property transactions, but updated lending criteria have injected fresh momentum into the market, keeping activity steady despite economic uncertainties.
Revised affordability checks widen buyer pool
The Bank of England’s decision to relax mortgage affordability stress tests in August 2022 has gradually made its impact felt. Lenders are no longer required to assess whether borrowers could afford a 3-percentage-point rise in interest rates, allowing more flexibility in mortgage approvals. This shift has enabled first-time buyers and those remortgaging to secure loans more easily, supporting demand during what is typically a quieter period.
Market activity defies seasonal trends
Estate agents and analysts report stronger-than-expected sales volumes in June and July, with property prices stabilising after a period of fluctuation. The average house price edged up 0.4% month-on-month in July, according to Nationwide, suggesting renewed confidence among buyers. The usual summer dip in transactions has been less pronounced, with mortgage approvals holding steady at around 50,000 per month—well above the lows seen during the 2023 downturn.
Regional variations persist
While the national picture shows improvement, disparities remain across the UK. London and the South East continue to lag behind the North West and Midlands, where affordability pressures are less acute. However, even in high-value areas, the adjusted lending rules have provided a lifeline to buyers who previously struggled to meet stringent repayment criteria.
Experts caution against over-optimism
Despite the positive trends, economists warn that the market is not out of the woods. Inflation remains above the Bank of England’s target, and further base rate hikes could dampen sentiment. “The relaxation of affordability tests has provided short-term relief, but affordability is still stretched for many households,” noted Sarah Coles, head of personal finance at Hargreaves Lansdown.
Outlook for the rest of 2024
The immediate future of the housing market hinges on broader economic conditions. If inflation continues to fall and wage growth holds steady, the recent stability could extend into autumn. However, any unexpected economic shocks or rate increases may test the resilience of the current uptick. For now, the revised mortgage rules have succeeded in averting the traditional summer slowdown, offering a glimmer of optimism in a challenging landscape.
REFH – Newshub, 29 July 2024
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