First time home buyers are often so elated at the point when they formally become homeowners, they don’t consider what is ahead of them. The stress is behind them, they no longer have to face rising rental costs, they have finally made it onto the property ladder and all is good. However, there remains as much of a need to create smart savings strategies and to stay aware financially as before when they were yet to own property. 

For the first time in two years, members of the Royal Institution of Chartered Surveyors (RICS) are anticipating house prices will increase in the near term. Since 2022, hopeful home buyers have been battling financial strains that were creating barriers to becoming a homeowner. Higher house prices that have remained elevated since the pandemic lifestyle buying boom, increased interest rates due to double digit inflation, and a lack of supply in starter homes coming onto the housing market have combined to make buying difficult. The subdued market has experienced house price increases and growth, but not to the level of the one expected.

Affordability and the lack of supply of properties in the housing market are being blamed for the housing market sitting idle. The expected spring bounce failed to materialize as summer came and home buyers remained disinterested either due to the inability to buy or because they were waiting out for better borrowing opportunities and more affordable homes coming to the market. Sellers are still putting homes on the market at higher prices because they can get it. No one is faulting the sellers, but buyers are having to be creative in their dream home shopping.

For the third consecutive month through June, the UK housing market has been subdued according to Halifax. Home buyers have stepped away from homeownership at the moment. There are specific factors at play such as elevated asking prices that have remained following record-breaking highs month after month that occurred during the pandemic when borrowing was historically cheap. Also, the more expensive interest rates from lenders, which though could be viewed as below normal, are much higher than what were available during the pandemic. There is also a lower supply of properties available which makes buyers competitive and shuts out those who find the higher prices and costlier interest rates a barrier to affordability. 

There is no doubt that the stress levels for some homeowners have been running high. This is likely most true for those leaving behind historically low interest rates as they come to the end of their term in 2024. During the pandemic, the Bank of England’s Monetary Policy Committee (MPC) lowered the standard base interest rate to the lowest in the Bank’s history to almost zero at 0.1%. It reached this low in March 2020 and was the last time a cut has been made by the MPC. Due to inflation, the MPC began increasing the rate in December 2021 and it grew to 5.25% by August 2023.

According to the most recent data from Nationwide, house prices are up 1.5% in comparison to the same time last year. Continued high prices in the housing market and high interest rates have made it difficult for home buyers. Affordability is an issue for those hoping to climb on the property ladder, and despite there being hope for the Bank of England’s Monetary Policy Committee (MPC) to cut the standard base interest rate, it will not likely open an easier path to homeownership. The ability to afford a home in the UK has become more difficult, even though the economy has survived double digit inflation to finally reach target of 2.0%, interest rates are not expected to increase but begin decreasing, and wages have grown.