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Confidence in UK housing market stalled at 2013 levels

Confidence in the housing market in the UK is stuck at its lowest level for five years with fewer people expecting house price to rise this year, new research has found.

Some 50% think prices will rise in 2018, down from 58% a year ago while saving for a deposit and job security are still major concerns, according to the latest housing market confidence tracker report from lender the Halifax.

However, fewer home owners with a mortgage are concerned about a potential interest rate rise than they were six months ago just after the Bank of England raised the base rate in November 2017.

The survey, which tracks consumer sentiment on whether average house prices will be higher or lower in a year’s time has failed to break through the 2013 score despite climbing three points from October 2017 to 33.

Half of those surveyed expect house prices to rise over the next year, the same as autumn 2017 and remaining at the lowest level since April 2013. But fewer people are now negative about the housing market, with 17% predicting a fall in prices over the next year, down from 20% six months ago, with 26% expecting prices to stay flat.

Less than a third of existing mortgage borrowers, 29%, are concerned about the possibility of rising interest rates affecting their ability to meet their monthly repayments. This has fallen from 42% in 2014 and, despite the base rate increase in November 2017, compares with 36% expressing concern about affordability six months ago.

On being asked how much monthly mortgage payments would have to increase by before they would struggle to meet them, some 47% said above £150 or that they would face no difficulties. Only 5% felt that an increase of £24 or less a month would be an issue, with a quarter point increase on the average mortgage of £156,000 equating to around a £17 rise in average monthly payment.

Similarly, interest rates are not considered a major obstacle by those surveyed when it comes to buying a home. Instead, the ability to raise a deposit continues to be the main issue buyers face, followed by concerns around job security and rising property prices.

‘With mortgages the most affordable they have been in a decade, it is perhaps unsurprising that a proportion of people remain unconcerned by the prospects of a base rate rise. This research suggests that for the majority of mortgage holders, there would need to be multiple rate increases before the affordability of their repayments becomes an issue,’ said Russell Galley, Halifax managing director.

‘Housing market optimism remains at a five year low and this echoes the subdued house price performance and activity levels we have seen since the end of last year, albeit set against a positive outlook for the majority who believe house prices will increase over the next 12 months,’ he pointed out.

‘Indeed, it’s encouraging to see fewer people now predicting a fall in house prices compared with six months ago. Overall, we still expect house prices to rise in line with our forecasts for the rest of the year,’ he added.

The research also shows that when it comes to the balance of people who think the next 12 months would be a good time to buy or sell, those living in the Midlands are more positive than the rest of the country. Scots are the next most optimistic around buying whilst those in the South of England are evenly split.

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