The decision by the Bank of England to increase interest rates has had an impact already on the plans of people planning to move home in the next six months.
Number of those looking to move was consistent this year at 8% but this dropped to 6% in the 48 hours after the announcement at the beginning of August amid fears that mortgage costs will increase.
The research for AA Financial Services looked at future demand for property, tracking people’s intentions to move, the timescale for moving, planned spend on a new home and the regions where people are most likely to be moving to and from.
The AA’s figures for July, suggest a summer high in property confidence, with a rise in proportion of people planning to move home in the next three months and the average planned spend on a new home up to an average of £320,736 from £312,702 in April.
‘After years of record low interest rates, the rise and indications that more is yet to come, mean that the cost of buying a home is going to get more expensive,’ said David Searle, managing director at AA Financial Services.
‘Given many people are moving home to save money, release equity or to make their money go a bit further it seems that, for some, the reality of living with rate rises may well temper their plans to move in the short term. We saw many positive signs emerging from our research in July, promise of a house moving high for late summer, which the rate rise seems to have dampened,’ he added.
Overall, in July some 22% of adults said they were considering moving house in the next two years. Those planning a move within the next three months had risen to 5% with those planning a move in the next six month unchanged at 8%. But two days after the interest rate rise, the figures fell to 4% planning a move in three months and 6% in six months.
Despite concerns over property supply, the research also revealed a significant swing among renters planning to buy their next house. Overall, 34% of renters said they plan to buy their next home, up from 28% in the spring.
Set against reports that UK house prices are rising at the slowest rate since March 2013, the study found a rise in target buy price that movers had available in July at an average of £320,736, up from £312,702 in April.
Some 20% of those aged 25 or under said in July that they wanted to buy not rent their next home, a significant rise from 13% three months ago. Of those looking to buy, 43% hope to get on the property ladder for £200,000 or less.
Compared to three months ago, planned spend had increased in all regions, apart from the North and Scotland, which both saw a fall while people in Scotland looked set to have the smallest mortgages, as they planned to spend the least to secure their next home, an average of £204,714.
Those moving home were gravitating south with 16% looking to move to London, 13% to the South West and 12% to the South East. It means that London has replaced the South East as the most popular destination since the spring, rising from 11% to 16%. The North East emerged as the least popular place to move to.
The locations where movers are most likely to be moving locally within their region were the West Midlands at 76%, Scotland at 72% and the East Midlands at 71%. The region people were most likely to move away from was the East at 48%.
‘Our July data painted a positive picture for August and September and following the rate rise we wanted to get a sense on whether external events such as these shaped people’s thinking and plans. On the evidence of what we have seen it looks like there was an immediate impact,’ said Searle.
‘Whether this is a short term reaction or not is too early to tell, but we would expect to see more people reacting to uncertainty by putting plans on hold. The key issue for many now is not so much house price trends but the cost of borrowing,’ he added.
