Only 16% of people think it is currently a good time to buy a home, the latest Building Societies Association property tracker has revealed.
This represents the lowest level seen since the property tracker started in 2008.
Meanwhile, 39% don’t think it’s a good time and the rest are unsure. The main reasons people said now is a bad time to buy are that house prices are so high (73%), followed by the fact that interest rates are rising (70%) and we’re suffering from high inflation (70%).
The main barriers to buying are raising a deposit (62%), and affording the mortgage (53%). The number of people put off by mortgage costs is growing.
One in four non-home owners (24%) aren’t confident they can afford their rent. This is up from 17% in March. By contrast, 6% of homeowners are worried about paying the mortgage – partly because so many of them are protected by fixed rates.
Paul Broadhead, head of mortgage and housing policy at the BSA, said: “It would have been naïve not to expect that people would be cutting back on their spending during the current cost of living crisis, but to see the extent to which people are struggling and being forced to cut back on essentials, such as heating and food, is concerning.
“It’s clear that spiralling inflation is impacting almost every household, and the possibility of another Bank Rate increase later today is only likely to add more worry onto the nation’s shoulders.
“Whilst it’s encouraging that less than one in ten homeowners are concerned about keeping up with their mortgage payments, this is likely to be because it will take time for Bank Rate rises to be felt by most borrowers, as around 80% are on fixed rates.
“Borrowers must however start planning for when their mortgage deal ends, as whilst the impact is likely to be quite modest, any increase in expenditure in the current environment will be unwelcome.
“Of greater concern is the growing number of people who are worried about paying their rent, which has doubled in the last 15 months.
“Whilst the support packages provided by the Government to date are obviously welcome interventions, it’s clear that for many, more support is needed if families are to survive the current crisis without increasing levels of personal debt.”
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, added: “Property buyers are getting cold feet in a heatwave.
“Higher house prices, runaway bills and rising rates have cooled their passion for property, and the vast majority aren’t convinced that now is a good time to buy. Meanwhile, higher prices are causing huge headaches for renters, and while those with fixed rate mortgages are protected for now, they can expect real pain when they come to remortgage.
“Property prices are a victim of their own success. Among those who said they didn’t fancy buying right now, almost three quarters have been put off by the enormous expense. Pressures building in the economy are taking a toll too, with seven in ten put off by inflation, and the same number worried by rising interest rates.
“This reflects the RICS report, which showed that buyers were starting to get more cautious. While estate agents still have several times more buyers than sellers on their books, there’s a growing risk that these won’t translate into sales. Cold feet tend to be contagious, so as more buyers pull out, we may well see sales ease off and property prices slow.
Rising costs
“Rising prices are hitting renters hard, particularly those who’ve renewed their tenancies in recent months, who’ve seen their costs climb at an alarming speed. Higher rents, coupled with a massive hike in the cost of everything else, means one in four aren’t sure they’ll be able to afford to keep a roof over their head in the next six months.
“Three quarters of homeowners with mortgages are protected, for now, by fixed rate mortgages, which is why only around one in 20 are worried about paying their mortgage at the moment. That’s likely to include many of the 2 million people on variable rate mortgages, and those who are coming up for a remortgage.
“Because while fixed rate mortgages protect many homeowners for now, they’re storing up problems for when they have to remortgage. We haven’t seen rates rise this far over such a short period for over 30 years, and remortgagers will face all these rises in one fell swoop.
“The good news is that at the moment, banks have so much lockdown savings swilling around that they aren’t passing on the full extent of the rate rise into their new fixed rate mortgages, particularly when it comes to five-year fixed deals. According to Moneyfacts, the average two-year fixed rate is up 0.74% to 3.03% since November and the average five-year deal is up 0.58% to 3.17% – at a time when the Bank of England rate is up 0.9 percentage points.
I”t means anyone with six months or less to run on their mortgage should consider locking in a new fixed rate now, to protect themselves from any further rate rises. The gap between two-year and five-year fixed rates is so narrow, that if it makes sense for your circumstances it’s well worth considering fixing for longer, and locking in that certainty for a longer period.
“Anyone with further to go needs to start considering now how they’re going to manage when their mortgage payments increase.”
