MNI INTERVIEW: UK House Buyers Resilient Despite Headwinds
MNI (LONDON) - The UK housing market faces headwinds into the next fiscal year, but overall remains resilient as many borrowers take advantage of lower lending rates, the chief economist at a leading mortgage lender told MNI on Friday.
Most borrowers on two-year deals will soon roll over onto lower rates and even those on five-year deals are set to see payments rise by less than feared a year ago. This is due partly to a competitive market and partly to a fall in longer-term mortgage rates in expectation of a lower Bank of England policy rate this year, Nationwide's Robert Gardner said in an interview.
"Most borrowers are going to see the benefit of lower rates, although some on residual five-year deals rolling over will obviously see higher rates than currently," he said.
While Gardner continues to expect the BOE to lower Bank Rate over 2025, he offered no opinion as to the timing or magnitude of any additional cuts.
HEADWINDS
Despite relatively favourable rates, other headwinds remain for home buyers, he conceded, noting that current brisk housing sales were at least partly due to a rush to beat higher stamp duty costs from April. But the end of a temporary increase in the threshold for paying the tax to GBP425,00 from GBP300,000 will have less effect than previous changes to the tax, he added.
"It’s been known for a while now and although there will be some impact, it will probably not be as big an issue as before," Gardner said. "This will likely lead to a jump in transactions in March, and a corresponding period of weakness in the following months, as occurred in the wake of previous stamp duty changes, although as I say, not to the same degree.”
Affordability ratios however are at historically high levels.
"It currently takes around 36% of a buyer’s monthly take-home pay to fund a house purchase, well above the historical average of 30%," Gardner said. "On top of other cost of living pressures, that remains an issue, certainly for first-time buyers."
Gardner saw turbulent times ahead for the wider economy, as U.S. tariffs threaten to impact global trade, though he continues to expect gradual recovery, picking up pace later in the year thanks to lower rates and as consumers benefit from strong wage increases. (See MNI INTERVIEW: Consumer Boost Lead For UK Growth- ONS Fitzner )