Iwona Hovenko, Real Estate Analyst at Bloomberg Intelligence, comments on recent findings from a Zoopla report that first-time buyers escaping rising UK rents are favouring smaller properties as they adjust to higher mortgage rates.
Lenders’ tougher affordability checks amid falling disposable incomes and high mortgage rates – combined with the still-elevated house prices (despite recent falls), all mean that prospective UK homebuyers need to make sacrifices to in order to buy their first home.
This is especially true as the tough rental market is further forcing the hand of house hunters, given the fast-rising rents and the relative insecurity of this tenure. Moreover, UK private-rented housing, unfortunately, is also of the poorest quality compared to all other tenures, based on the English Housing Survey, while the competitive rental market is further discouraging tenants from raising issues for fear of eviction.
Bloomberg Intelligence’s previous housing survey pointed to the desire to “stop renting” as the strongest motive to buy a house among first time buyers (59%), especially in London (64%). Meanwhile, switching to a cheaper property was the #1 option buyers would consider to offset higher rates.
Previously, low interest rates, as well as Help to Buy, have allowed first time buyers to skip a step up a housing ladder and buy a larger home (for example a three-bed house), helping save on future moving costs and stamp duty bills.