The housing market is still quite busy. The demand is strong as home buyers are still inquiring as to available properties through agents and online listing sites. Supply in the market is low, but competition for properties is evident when shopping for property. Activity in the market could be evidence that there are buyers seeking to secure their purchase before more interest rate hikes occur and borrowing becomes more expensive. 

However, the interest rate hikes are likely causing an issue with affordability. What may have been affordable this time last year is now much more expensive. In fact, for some, those same properties due to higher rates could be out of reach. This is due to the Bank of England’s standard base interest rate climbing from the historic low of 0.1% last year through to December 2021 to the now current 1.0%.

The last four consecutive meetings of the Bank of England’s Monetary Policy Committee (MPC) have resulted in a hike to the standard base rate. The next meeting is in June and could result in yet another increase. This is especially so due to there not being a meeting in July. The MPC would have to wait until August to respond to the issues of inflation.

The rate of inflation is around 9% currently and there have been warnings of it reaching 10% in summer. The target level of inflation set by the Bank is 2.0%. 

With the current inflation level higher than it has been in 40 years, the impact on household budgets is a problem. Combined with higher energy and fuel costs and many still in recovery mode from the pandemic and lockdowns, the ability to save for a deposit by first time buyers will be next to impossible.

The ability to forecast exactly how buyers and the housing market will respond over the next few weeks and months is a complicated issue. The UK housing market has been resilient during times when it was thought it would falter such as was the case with the pandemic.

It could have been easily thought that the entire process of home shopping would be compromised due to lockdowns, but agents and buyers persevered and used technology to help property shopping continue on. The market also benefitted from pandemic lockdowns as it put focus on the comfort and convenience of having more space both in and out of one’s home. More space would allow for easier access to private work and study areas and greenspace outdoors for pets and family.

The global and economic uncertainties could be causing a continued strong desire for a permanent and reliable home base. Inflation, food and energy shortages, the continued pandemic issues, and the war in Ukraine are all factors that could push demand for one’s own home to the top of consumer priority lists. If so, the housing market could continue to be resilient despite expectations of a strong slowdown to come.

No matter what occurs, the housing market is primed for yet another surprise performance amongst so many unknowns.