Most mortgage holders confident about meeting payments despite higher cost of living

Strong house price growth, rising interest rates and surging living costs are denting people's confidence in the housing market -- but most mortgage holders are confident in their ability to continue making their monthly repayments.

Those are among the key findings of the latest Property Tracker Report from the Building Societies Association (BSA), which represents the UK's 43 building societies as well as six credit unions.

Among the more than 2,000 people surveyed in early March, just 18% said that now is a good time to buy a property -- the lowest figure seen since the report began at the height of the financial crisis in 2008.

Concerns about the cost of mortgage repayments are uppermost in many people's minds. Almost half (48%) of those surveyed said that affordability of monthly mortgage payments is among the biggest barriers to buying a property, up from 39% just three months ago.

Households are seeing their monthly outgoings rise, with more pressure to come in April as the energy price cap is due to increase and higher national insurance payments will reduce people's take-home pay.

Encouragingly, however, the majority of those with an existing mortgage (90%) are confident they will be able to meet their regular mortgage payments over the next six months. Contributing to this confidence is the fact that 81% of all UK mortgages are on a fixed rate and therefore protected, for a period, from rising interest rates.

For those trying to get a foot on the housing ladder, raising a deposit continues to be the biggest barrier to buying a home with 59% citing this, an increase from 55% in December.

House price growth across the UK accelerated in February, with prices on average £29,000 higher compared to a year ago, according to the latest data from Nationwide.

"The price of a typical home rose above £260,000 for the first time in February, an increase of £29,162 over the past 12 months," said Nationwide's chief economist, Robert Gardner. "This is the largest ever annual increase in cash terms since the start of our monthly index in 1991. The price of a typical home is now £44,138 (20%) higher than in February 2020 -- the month before the pandemic struck the UK."

A majority of consumers expect house prices to continue climbing, with the BSA's survey finding that 48% think prices will rise over the next year while 12% expect house prices to fall.

"It's good to see that despite being in a rising interest rate environment, the majority of mortgage holders remain confident that they will be able to continue to make their mortgage payments," said Paul Broadhead, head of Mortgage and Housing Policy at the BSA.

"However, the increase in the number of people citing mortgage affordability as a barrier to buying a home is likely to continue if we continue to see high demand and low supply in the housing market. Price growth at the current pace is clearly unsustainable and a much higher volume of new build and resale homes coming to market is needed to change this dynamic."

Broadhead added that although lenders expect some flattening of new mortgage demand as the year progresses, the remortgage market is likely to remain buoyant.