House purchase activity returned to pre-Covid-19 trends in Q2 2022, but data indicates there are tough times ahead, according to UK Finance’s latest Household Finance Review, produced in collaboration with Accenture.
Looking ahead the trade body warned that cost of living pressures are likely to dampen effective demand for house purchases in the coming months.
It also warned of potential trouble for those looking to remortgage. For households in the lowest income brackets, borrowers could be faced a smaller range of refinancing options, as they may fall short of some lenders’ Financial Conduct Authority-mandated income-expenditure affordability tests.
However, UK Finance said most customers will be able to refinance on the open market or refinance onto a new deal with their existing lender.
Eric Leenders, managing director of personal finance, UK Finance, said: “Household spending was stable in the Spring, with increased personal loan borrowing.
“As we head into the Autumn, the pressure on household finances will increase and we anticipate a drop in consumer spending and house-buying activity.
“Anyone struggling with their finances should get in touch with their lender as soon as possible to discuss support available to them.”
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Vikki Jefferies, proposition director, PRIMIS:
“Although borrowing has dropped for house purchases, we expect remortgage and buy-to-let activity to remain buoyant for the rest of the year.
“With today’s data showing elevated pressures on household budgets, advisers can support consumers by offering a range of flexible products that will enable them to maximise their assets to enhance their finances in the long-term.
“However, given approximately £100bn of mortgages are set to mature by the end of 2022, brokers will have an extremely busy pipeline of business in the coming months, and they will certainly be stretched.
“It will be vital to provide them with proactive and sustained support, and as such, we will continue to support our brokers through our Virtual Experts page and our product desk will be on hand to assist with client queries.”
Richard Tugwell, director of mortgage distribution at lending specialist Vida:
“The scale of the challenge facing Liz Truss as Prime Minister is not to be underestimated, and she needs to act fast to address the multitude of challenges that Britain is currently facing.
“Chief amongst these challenges are the spiralling cost of living and energy crunch. While these figures show that there has been relatively robust spending by households across the UK in Q2, this is likely to decline as rising interest rates, fuel, energy, and grocery costs kick in and begin to have a real impact on household budgets.
“With rising mortgage rates and house prices, in addition to increased living costs, brokers will need to work harder than ever to support their clients and find them the right mortgage for their needs as affordability is no doubt going to be stretched, especially for the lower-income families and first-time buyers.”
