The UK housing market is expected to begin a slowdown, but not just yet. The demand for property is still high with numerous reports from property listing sites, estate agents, builders, and lenders revealing another record high in UK housing prices. This is despite the increase of inflation, the continued impact of the pandemic, higher energy and fuel costs, and higher borrowing costs. 

The pandemic caused a strong demand for property. The demand was for more space, more space indoors and outdoors as everyone dealt with lockdowns and the need to work and study from home. Though we have somewhat moved back toward normal, some are still working from home and many are doing hybrid work which allows one to work from home and at the workplace. These factors are thought to have motivated buyers to stay in the market.

There is also motivation to buy and try to grab a mortgage before interest rates are increased again. Currently the Bank of England’s standard base interest rate is 1.0% having grown during each of the Monetary Policy Committee’s (MPC) last four meetings. The rate had been steady at an all-time historic low of 0.1%, but was increased for the first time during the December 2021 meeting. The next MPC meeting is in June and another rate hike could occur due to the ever increasing inflation rate.

The inflation rate now sits around 9.0% which is far above the target rate of 2.0% set by the Bank. A warning came earlier this month that inflation is expected to soon rise to 10.0%. 

Experts believe that borrowers will continue to take action to secure a mortgage or remortgage soon to allow choosing between interest rate offers currently available rather than face higher ones in weeks and months to come. 

Not only is saving with a lower interest rate a motivator to borrow sooner rather than later, but the expectation of a tightening in lending is a possibility and borrowers are likely keeping that in mind when deciding to buy. 

Due to continued lack of supply in properties within the housing market, rising interest rates, rising asking prices, and the soaring cost of living, it is expected that saving for a deposit will be a greater hardship for first time buyers. It is therefore likely that many will be closed out of the market. 

A slowdown of the market is expected, but when it starts to show up is an unknown. Of course, the UK housing market has proven itself to be quite resilient and outperform expectations during hard economic times, much like it did with Brexit and the pandemic. This is why the forecasts are being cautious in forecasting a hard freeze out in the market, but rather an expected slowdown at some point, for the dream of being a homeowner is still a powerful one.