UK banks are now seeing a challenging future ahead for the next few years due to falling demand in the housing market, low interest rates, and higher property tax rates. House prices have been spiraling upward for years which is now affecting overall demand. Interest rates are now at levels in which banks are struggling to make money off loans. Higher property tax rates are putting off foreign investors. Banks with heavy mortgage lending loads are now expecting a future full of challenges.

The housing market has seen a boom taking place right before their eyes for years. Although this boom has led to higher, stronger house prices, it also has placed housing in a unique air. Residences have now acquired elite status. This level of cost has gradually put many people in a bind due to how expensive it is to reach the first rung of the property ladder.

Banks are now feeling the effects of the positive of strong house prices against the negative of few buyers. This combination cannot sustain itself and has over time seen fewer and fewer people able to afford everyday housing. There are government programmes in place, but they can only assist so many new buyers trying to afford a home.

Chirantan Barua with Bernstein Research commented on the latest data to surface, saying: “We will see what happens on June 23, but our short on the UK goes much beyond Brexit – stamp duty, rise in unemployment, end of quantitative easing, Chinese capital controls, offshore account scrutiny etc. Trough-to-peak, prices in the south have increased nearly 60pc while wages have hardly moved. Quite clearly, this isn’t a short-term, event-driven issue.”

Barua added: “UK bank investors would be wise to get out if there were to be a pop, given the housing market has not one but a motley collection of headwinds going against it for the next two years.”