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Navigating the Housing Crisis

Navigating the Housing Crisis

With increasing inflation and interest rates placing stress on homeowners’ budgets, it comes as no surprise that renters and homeowners are finding it increasingly difficult to afford housing costs and the number of first-time buyers has dropped by more than a fifth. If you are feeling the financial strain of the current economic crisis and finding it difficult to make ends meet, you are not alone and there are things that can be done to help take control.

According to Rightmove, the rent requested by landlords has increased by more than 20% over the past year; the current average rent being £1,278 per calendar month and £2,627 in London. This steep rise in prices is thought to be caused by the limited availability of rental properties. The average property now receives twenty-five inquiries from potential tenants, all battling for their spot. Landlords’ buy-to-let mortgages are also suffering from high interest rates, worsening the situation for renters in the UK.

There is hope. Tim Bannister, Rightmove’s director, highlighted that the balance between supply and demand is beginning to relieve with an increasing number of rental properties entering the market. The impact of the closing gap is unlikely to be seen in the short term. However, the speed of rent rises will significantly decrease if these improvements continue.

Mortgage borrowers are also feeling the squeeze in their budgets. Since the Bank of England started increasing interest rates to tackle the rise in inflation, mortgage rates have increased significantly. In 2021, an average two-year fixed mortgage sat at 2.34%. The average two-year fixed deal currently sits at 6.43% despite the steady decrease in recent weeks. Most banks within the UK are aware that borrowers are being discouraged from buying property, the market is losing pace, and homeowners are struggling to meet repayments. It may come as a relief to hear several mortgage lenders, such as Halifax and Santander, have recently slashed their rates.

The far-reaching impact of the current economic climate also extends to first-time buyers. Entering the housing market has become increasingly difficult over the past decade. In the UK, the average age of first-time buyers has increased from twenty-nine in 2001 to thirty-two in 2023. With the rise in house deposits and stringent mortgage applications, it is no surprise that individuals are waiting until later in life to buy their first home.

Many individuals buying their first home turn to the ‘Bank of Family’ to boost their deposits and help them join the housing ladder. According to research conducted by the Centre for Economics and Business Research, approximately 42% of all family members over fifty-five have contributed to their family members’ new homes by using investment, savings, and pensions. However, legal advice should be sought before helping towards family members’ housing costs as grandparents and parents may be negatively affecting their own retirement income. Gifting money to family members is not the only way grandparents and parents have tried to help; a third have allowed adult children to move back into the family home to save up for a deposit.

Despite the significantly high mortgage rates and the unstable economic climate, homeowners and buyers can look forward to a brighter future. According to eXP UK, the housing market is predicted to record an increase in transactions compared to this time last year as we witness a “brilliant year” for buyers. Major banks within the UK, such as Nationwide and Halifax, have reported a decline in house prices – the largest annual decrease since 2019.

If you are anxious about the rise in housing expenses, there are many things you can do to help relieve the stress. The least effective and most counterproductive action to take would be to ignore your concerns.

If you are experiencing difficulties, contact your mortgage lender as soon as possible. Lenders are always happy to help and there are more options to consider if you contact them at the earliest opportunity. Depending on your circumstances, different lenders offer different services and products to assist you. Some lenders may extend your mortgage term to reduce monthly repayments, offer temporary payment deferrals, reduce monthly repayments, or temporarily request interest only payments. If your lender has signed up to the Mortgage Charter, they can offer greater assistance if you are up to date with your repayments.

With a friendly and approachable nature, our conveyancers can help address your concerns when navigating the property buying, or selling, process.

If you are buying or selling a property, please contact us today; we are happy to help.