Home movers and first-time buyer numbers down as cost of living pressures rise: UK Finance

UK Finance says that whilst it expects mortgage activity to be strong through this year, this will largely be driven by customers coming to the end of their fixed rate deals and looking to switch to a better rate. This contrasts with previous years when a significant element of remortgaging activity involved borrowing substantial sums of additional money, in many cases to fund further property purchases.

Although there was a decrease in home movers and first-time buyers compared to the unprecedented highs of last year, numbers remain slightly above 2019 levels as the ongoing effect of the pandemic drives demand for more space.

The research also includes new analysis on the potential impact of the cost-of-living challenge facing households this year.

Its analysis found that the average mortgaged household will see a 3% reduction in the amount of disposable income left over after mortgage, credit commitments and living costs. However, the cost-of-living squeeze will be felt most acutely in lower-income brackets, which have around half the spare income of those in higher brackets, even before cost-of-living pressures are factored in.

The research found that most borrowers across all income brackets would still qualify for the same sized mortgage now as they did last year. However, there will be some borrowers who would not qualify for the size of loan granted last year due to the new additional costs, which may result in a softening of demand for mortgages this year.

Eric Leenders, managing director of personal finance at UK Finance, said: “During the first quarter of 2022 we saw the spread of the Omicron variant of Covid and consumer prices beginning to rise, although this did not translate to any drop off in spending or mortgage borrowing.

“However, we know that some people, particularly those on lower incomes, will already be feeling the strain. There are significant additional pressures on household finances in the second quarter, most notably from energy price rises and tax changes. Our analysis shows that this year there will be a three per cent fall in disposable incomes for the average mortgaged household, which may result in more subdued spending and borrowing."