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Confidence in housing market falls as rate rise fears continue

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Consumer confidence in the housing market has dropped in September, the sixth consecutive quarter the BSA's tracker has recorded a negative score. Following the increase in Bank Rate from 0.5% to 0.75% in August, the cost of monthly mortgage repayments has become an increasing concern with 48% of consumers seeing it as a barrier to home ownership, up from 44% in June 2018.

The last time this number of consumers rated monthly repayments as a barrier was back in June 2014 (49%). The BSA also believes uncertainty about Brexit – deal or no deal – is dampening the volume of property purchases.

However despite increasing struggles for first-time buyers, the BSA's head of mortgage and housing policy, Paul Broadhead, said he doesn't think the Help to Buy scheme should become a permanent part of the market. Paul said: “Consumer negativity on home purchase is borne out by a mortgage market which remains subdued. The only area of mortgage lending which has seen any growth this year is the remortgage market. This has been in part driven by borrowers looking to fix their mortgage rates as Bank Rate rises. Now there is evidence that fixed rate periods are starting to rise with borrowers looking to secure their repayments before the Bank Rate rises again. “Uncertainty about Brexit – deal or no deal – is dampening the volume of property purchases, with many of those who can delay doing so. High house prices in some regions are still a huge issue, especially for first-time buyers, and more than a third of consumers (36%) still believe that prices will rise in the next 12 months. That should be set against 22% who believe that they will fall. “Whichever way prices go, raising the necessary deposit has not diminished as a material barrier to owning your own home – the majority of consumers (65%) say that it is the most significant barrier that they face.

“Help to Buy: Equity Loan has been an important feature in the market for five years and has helped 170,000 buyers, both first-time buyers and second steppers. Rumours that it is under review has caused some to demand that it becomes a permanent feature of the market and others for it to changed or be withdrawn.

“The fate of this scheme after 2021 was always going to be difficult, but in my view it should not become a permanent part of the market. Tapering it down could be one option.

Posted by MMB Finance Swindon and Gloucester on 27 September 2018