High mortgage costs cripple demand in the UK housing market, as rents soar
ALBAWABA – The United Kingdom’s (UK) Royal Institution of Chartered Surveyors reported further decline in the UK housing market on Thursday, with a key index falling deeper into negative territory than at any other time since 2009.
The institution’s report said almost every region in the country is now experiencing “relatively steep” falls in house prices, as reported by Bloomberg.
Agents are predicting the downturn will worsen in the coming month, the report added.
Higher interest rates to curb runaway inflation in the UK significantly undermined the UK housing sector - Shutterstock
As the Bank of England raises interest rates, mortgage rates have hit their highest since 2008, driving borrowing costs through the roof and leaving an increasing number of households unable to service their loans.
Between skyrocketing inflation and high interest rates, people are struggling to keep up as they grapple with the spiraling cost of food and basic goods.
Millions more will feel the squeeze by the end of next year as fixed-rate deals expire and they are forced to refinance at significantly higher rates, Bloomberg reported.
Demand on rent rises as high interest rates cripple the UK housing market
“Prices are continuing to slip, albeit that the relatively modest fall to date needs to be seen in the context of the substantial rise recorded during the pandemic period,” said Simon Rubinsohn, chief economist at RICS. “Critically, affordability metrics still remain stretched in many parts of the country.”
Buyer demand and agreed sales continued to fall sharply against a backdrop of “economic uncertainty and the high cost of mortgage finance,” he added.
Meanwhile, an index of house prices slumped by 13 percentage points to -68.
UK housing prices took the biggest hit in almost 14 years - Shutterstock
The West Midlands, East Midlands, East Anglia and the South East of England all exhibited “particularly negative feedback.” Northern Ireland was the only region still in positive territory, the economist noted.
Last month, mortgage lenders Nationwide reported UK housing prices have dropped nearly 3.8 percent in July, compared to July 2023, after a 3.5 percent annual fall in June, according to Reuters.
As people struggle to acquire loans to buy houses, more turn to leasing real estate instead of purchasing, which has driven rent prices higher.
Leasing agents overwhelmingly expect rents to go even higher in the next three months, Bloomberg reported.
Almost half of the people residing in London cannot afford to pay their rents, according to a survey by real estate investment firm Castleforge, reported by Bloomberg. And a little less than half of the people in Northern Ireland too are struggling to make rent.
