28 November 2024
If you are covering the Halifax Affordability Review, please see the following comment from Karen Noye, mortgage expert at Quilter:
"The Halifax Affordability Review lays bare the challenges facing the UK housing market. Our calculations based on the figures show that the difference of just one year in terms of the mortgage rates on offer could saddle homeowners with an additional £20,000 in interest over the life of a 30-year loan.
"According to Halifax, in Q3 2023, the average monthly mortgage cost was £1,166 based on the average house price, a 5-year fixed rate, a 25% deposit, and a 30-year term with average interest rates. By Q3 this year, the monthly cost decreased to £1,060. Over the full term, this difference could mean a total repayment of £401,822 compared to £381,812 on the average home.
"This reality reflects the pressures buyers have faced in recent years as fluctuating rates and economic uncertainty have bred a degree of paralysis in the market. Many prospective homeowners have hesitated to commit, and this caution has contributed to more subdued house price growth. However, it’s worth noting that house prices are likely to inflate by the surge of first-time buyers rushing to beat the stamp duty holiday deadline following the changes at the budget, leaving affordability under pressure.
"Unfortunately, while affordability has improved slightly over the past year, this progress remains fragile. Wage growth, though outpacing house price inflation, may falter in the face of the government’s proposed budget changes, particularly around employer National Insurance Contributions (NICs), which could constrain businesses’ ability to deliver meaningful pay rises. Without robust wage increases, any affordability gains could quickly evaporate, particularly given the persistent supply and demand issues plaguing the UK housing market.
"With too few homes available to meet demand, house prices remain likely to continue their upward trajectory even as wage growth stagnates, further exacerbating affordability challenges for first-time buyers. The government’s target of building 300,000 homes a year offers some hope of stabilising prices if achieved, but that ambition remains far from reality. For now, the combination of rising prices, modest wage growth, and recent market distortions, such as the stamp duty rush, continues to weigh heavily on prospective buyers. Without significant policy intervention, the affordability crisis will persist, leaving many aspiring homeowners locked out of the market."
