"The Bank of England’s decision on Thursday will determine how optimistic we can be, but with mortgage rates dipping below 4% and a lower energy price cap on the horizon, there are positives to be found amidst current market turbulence"
- Jatin Patel - Barclays
According to Barclays Property Insights data, rent and mortgage spending increased by 5.2% year-on-year in April, slightly down from 5.4% in March as many lenders reduced mortgage rates. Confidence in household finances remained steady at 70%, while many UK homeowners are making overpayments to reduce their mortgage term.
Confidence in the UK housing market stayed consistent with March at 29%, amid speculation that the Bank of England will cut the Base Rate on May 8 and mortgage rates will fall further. Research conducted between April 18-22 showed that interest rates remained a concern for 61% of consumers, down slightly from 63% in March.
In an effort to reduce the impact of interest payments, 23% of mortgage holders are making overpayments, averaging £221 per month or £2,647 per year. These overpayments are expected to reduce their mortgage term by an average of four years.
Council tax hits second homeowners
30% of people who have seen an increase in housing costs in the past 12 months cited council tax as the biggest contributor. From April, second homes are subject to further council tax premiums of up to 100%, affecting 7% of homeowners who own a second property.
Those impacted expect their bills to rise by £840.10 per year on average, and 35% of second homeowners are considering selling their additional property.
Renters’ goals of homeownership remain achievable
Despite recent increases in stamp duty, renters' confidence in their ability to buy a home within five years improved slightly in April. 20% of renters now see it as a possibility, up from 15% in March.
The proportion of renters who see getting a mortgage as a barrier to homeownership fell to 18%, down from 21% in March, following several high street lenders dropping mortgage rates.
This increased confidence is reflected in the number of renters saving for a deposit, with 27% doing so in April, up from 22% in March.
“Mortgage demand remains resilient, with encouraging signs that young renters feel more confident about entering the property market, despite high interest rates and an uncertain economic landscape," explained Jatin Patel, head of mortgages, savings, and insurance at Barclays.
“For mortgage holders fortunate enough to be able to make overpayments, it can be a great way to reduce the length of your loan term or minimize the impact of possible rate shocks coming after a lower fixed deal. It’s important to always weigh up the cost savings with other financial goals and commitments, as well as potential early repayment fees.
“The Bank of England’s decision on Thursday will determine how optimistic we can be, but with mortgage rates dipping below 4% and a lower energy price cap on the horizon, there are positives to be found amidst current market turbulence.”
Will Hobbs, Managing Director of Barclays Private Bank and Wealth Management, added, “The UK economy’s cyclical pulse has been strengthening a little in the last few months. Household incomes have continued to grow faster than inflation, showing up in consumption.
“The uncertainty created by the US tariffs will certainly have some dampening effect. However, there are potential offsets in the form of lower energy prices and dramatic changes in Europe. The latest read on inflation suggests a little more flexibility for the Bank of England, too, ahead of tomorrow’s decision.”
