UK Housing Market Shows Resilience Amidst Rising Mortgage Rates

Image: UK Housing Market

The UK housing market has shown signs of resilience in the face of rising mortgage rates, with house prices increasing by 0.4% in May, according to Nationwide. This increase brings the annual growth rate to 1.3%, despite a rise in benchmarked mortgage rates.

“The market is showing symptoms of resilience,” said Robert Gardner, chief economist at Nationwide. “Stronger real wage growth has boosted consumer confidence.”

However, mortgage approvals fell slightly in April, and consumer credit borrowing decreased from £1.4 billion to £0.7 billion. This suggests that households are being cautious with their spending.

Mortgage Rates

The rise in borrowing rates has slowed the housing market, but not derailed it yet, according to Rob Wood, chief UK economist at consultancy Pantheon Macroeconomics. “Consumers have already set aside enough profits to replenish their savings, and they would soon be inclined to spend more,” he said.

Savings

Households put an additional £11.7 billion into Individual Savings Accounts (ISAs) last month, a record high, according to the Bank of England. This suggests that households are prioritizing saving over spending.

House Prices

The housing market is expected to continue to show signs of resilience, despite the challenges posed by rising mortgage rates. As Robert Gardner said, “The market is showing symptoms of resilience in the face of ongoing affordability pressures.”

Mortgage Approvals

Mortgage approvals fell slightly to 61,100 in April, down from 61,300 in March. However, net mortgage borrowing increased to £2.4 billion in April, up from £0.5 billion in March.

Inflation

Inflation dropped to 2.3% in April, the lowest level in nearly three years. This suggests that the economy is slowing down, and households are becoming more cautious with their spending.

Interest Rates

The Bank of England has held interest rates at 5.25% since August. However, the effective interest rate on new deposits with banks and building societies increased by 3 basis points, to 4.40% in April.

Savings Accounts

The effective interest rate on newly drawn mortgages was 4.74% in April. This suggests that households are prioritizing saving over spending, and are becoming more cautious with their borrowing.

In conclusion, the UK housing market is showing signs of resilience amidst rising mortgage rates. Households are prioritizing saving over spending, and are becoming more cautious with their borrowing. However, the market is expected to continue to face challenges in the coming months.