The market is slowing down, as mortgage borrowing was lower than the same period a year ago in the second quarter of 2022, the Household Finance Review from trade body UK Finance shows.
Growth in mortgage application levels – a forward indicator of mortgage completions in the following quarter – also dropped year-on-year through Q2.
UK Finance said there’s been a reduction of house price demand, though a number of households are seeking to refinance after their fixed rate period has come to an end.
Affordability is an issue, as on average homeowners seeking to refinance can expect to see a reduction of just under 11% of their disposable income.
Eric Leenders, managing director of personal finance, UK Finance, said: “Household spending was stable in the Spring, with increased personal loan borrowing. We understand that some consumers are making larger purchases earlier than planned to stay ahead of inflation.
“As we head into the autumn, the pressure on household finances will increase and we anticipate a drop in consumer spending and house-buying activity. Anyone struggling with their finances should get in touch with their lender as soon as possible to discuss support available to them.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “It’s becoming increasingly clear – and not just at the coalface – that the shortage of stock is continuing to support prices but at the same time disguising the impact of the rising cost of living on the rest of the market.
“Another problem is that demand can disappear if not satisfied fairly quickly so prices may soften further.
“Nevertheless, we’re not seeing widespread renegotiations or buyer withdrawals so don’t expect a significant correction yet although the market is certainly more price sensitive than a few months ago.”
Tomer Aboody, director of property lender MT Finance, said: “With so much uncertainty set to come over the next 12 to 24 months, the market will start to stabilise but whether there is a crash remains to be seen.
“There would need to be high sales volumes at lower prices for that to happen but with inflation rising there will be worried homeowners who bought in the past few years.
“Let’s hope Liz Truss’ appointment results in some quick assistance to manage the pain.”