The Bank’s latest Financial Stability Report says the UK economic outlook has “deteriorated”, increasing pressure on households and businesses making buyers reluctant to commit to major financial decisions.
Government data from HMRC, analysed by Emoov, has found that nearly a quarter of private landlords (24%) plan to reduce the number of rental properties they own within the next year, rising to a third (33%) over the next five years, underlining how fragile confidence is among smaller landlords.
Reacting to the Bank of England’s warning, property expert Nick Neale explained, “The warning from the Bank of England will only deepen the anxiety buyers are already feeling. If over a million households are braced for higher mortgage costs, people will understandably think twice before taking on fresh debt.”
“Taken together, the Bank of England’s warning and the government’s own landlord data paint a picture of a housing market where both homeowners and landlords are being squeezed from all sides.”
The mortgage rate uncertainty may also impact landlords.
Nick Neale of Emoov adds, “With policy changes affecting the rental sector, we are seeing an increasing number of landlords selling up, and smaller investors are leaving the market. New landlords are staying out of the market now because borrowing costs are high and the return is not there. If mortgage costs rise for existing landlords as well, you risk even more rental stock being pulled from the market.”
“Uncertainty across the country and around the world is making people second-guess their decisions, especially when it comes to purchasing a property. Growing economic instability, including rising unemployment, interest rate hikes and climbing inflation, means people are a lot more cautious about what the future may hold.”
Nick advises potential homebuyers to consider affordability at all stages of buying a property.
“Buyers need to think carefully about affordability and avoid rushing into decisions. People are understandably more conscious of the costs, including the property price, legal fees and future mortgage payments. In the current climate, stress-testing your own finances is just as important as any checks the lender carries out.”
Top 5 tips for homebuyers
- Check affordability first – Make sure monthly costs are manageable now and if interest rates rise further.
- Consider all costs – Factor in legal fees, taxes and rising household bills, not just mortgage repayments.
- Have a clear plan – Focus on long-term affordability rather than trying to time the market.
- Think long-term – Consider future costs, job security and potential life changes before borrowing.
- Seek professional advice – Speak to a mortgage adviser to understand your options and the impact of different rate scenarios.
Nick concludes, “It’s a real shame that interest rates have increased again as people have put up with a high base rate for a couple of years. The situation is unfortunate for everyone, whether you are a buyer or a landlord, and global events are only adding to the pressure on UK households.”
