House prices could remain flat for the next seven years figures out today reveal.
According to the latest Rightmove House Price Index, this year’s traditional spring bounce has ground to a halt and sellers have only belatedly realised buyers are unwilling or unable to pay ever increasing prices.
The report says while there is strong evidence of a soft landing in the housing market if the current trend continues it will take seven years for the average wages of first time buyers to rise enough to be able to afford to pay their mortgage.
Annual house price inflation fell from 4.9% to 2.4% in June says Rightmove, with wage inflation exceeding the rise in house prices for the first time in a decade.
Mile Shpside, commercial director at Rightmove, says: “As many sellers are refusing to part with gains they have made, buyers are forced to make up the affordability gap. The reality is it will take seven years of static house prices and wage inflation to bridge this affordability gap. In the meantime we should expect lower sales volumes for several years as the market waits for buyers to play catch-up.”
Righmove has also added to the pressure building on the Bank of England to lower interest rates sooner rather than later saying a reduction in interest rates would still make a big difference to affordability levels. The report claims a drop of 1% in interest rates would bring affordability back into line within four years.
Meanwhile, figures released by the British Bankers Association (BBA), suggest the market appear to support Rightmove’s position. The BBA says net mortgage lending in May rose by an underlying rate of £4.3bn, some £0.3bn higher than the previous month but lower than the average increase for the previous six months of £4.5bn.
David Dooks, BBA director of statistics, says: “Mortgage lending was below its recent averages and although personal loans saw an average rise, credit card lending by the major banks continued at a very low level and in line with weak retail sales. Corporate demand was also muted with lending only to companies related to commercial property showing any real demand.”
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