Homebuyers put off by political uncertainty and high interest rates
Potential homebuyers are being put off by a perfect storm of political and economic uncertainty alongside high interest rates, according to one of the nation’s major housebuilders.
FTSE 100-listed Berkeley Group said sales were a third lower than the same time in its previous financial year.
The firm blamed the nervousness among buyers on the febrile political climate in Westminster, caused largely by the fact an election has to be held by January next year.
Chief executive, Rob Perrins, also said that the economic situation in the UK, where high inflation is contributing to a cost-of-living crisis, was a contributing factor that was making potential homebuyers think twice.
While inflation dropped marginally in January – hitting 5.1 per cent in January compared to 5.2 per cent in December – it still remains well above pre-pandemic levels.
Higher interest rates than have been experienced for much of the time since the 2008/09 financial crisis also mean that people are often able to borrow less money.
Currently, the base rate sits at 5.25 per cent. The Bank of England will announce if it remains the same or has dipped next week.
Mortgage loans are also costing buyers more with rates creeping back up again this month.
The average five-year fixed rate mortgage is currently at 5.35 per cent, which is up from 5.18 per cent at the start of February, according to Moneyfacts.
For a borrower with a £250,000 mortgage, this would mean monthly payments of £1,512 instead of £1,487 – which is £25 per month or £300 per year more.
Halifax, Santander and NatWest have all announced price increases this week, with several lenders reversing the cuts they made back in January, when expectations were that the Bank of England base rate would fall soon, and at a faster rate than economists now expect.
Sales rates during the period have been consistent with the first half of Berkeley’s financial year, remaining around a third lower than the comparative year,” the firm said in a trading statement.
“Enquiry levels are good, with customers looking for the prevailing political and economic uncertainty to recede and interest rates to begin to fall.”
The firm added that the price of properties had been “stable” across its sites.
The most recent broad data on the UK housing market shows that prices are rising, but are doing so more slowly.
The Halifax house price index for February showed prices rising for the fifth month in a row, but on an annual basis, the 1.7 per cent increase was smaller than January’s 2.3 per cent.
This means the average UK house price – now at £291,699 – is only £1,800 off the peak seen in June 2022.
