UK’s home owners can ‘weather cost-of-living storm’

The housing market can weather the storm of rising interest rates and a cost-of-living squeeze, according to a City report. 

Homeowners are less exposed to Bank of England rate increases than during previous downturns, even with a possible 0.75 percentage point rise later this month. 

Such a rise would take the base rate set by the bank to 2.5 per cent. 

Mortgage lenders and borrowers have become ‘more prudent’ than they were in the 1992 and 2008 recessions, with many home loans taken out at fixed rates, Liberum said. 

Analysts at the London broker also highlighted the strength of the labour market, with unemployment near a 50-year low of 3.8 per cent and a high level of vacancies. 

That means people could ‘find jobs quickly if the need arose’, and firms would be less willing to make people redundant amid worries about recruiting new staff. 

Interest rates soared as high as 15 per cent during the early 1990s, forcing thousands of borrowers to sell their homes quickly. Prices also fell in 2008. 

A rout in UK housebuilding stocks last month has seen the sector’s ‘third worst month’ in 14 years amid concerns rates and inflation could make properties less affordable, said Liberum. 

But it said the sell-off in shares of the UK housebuilders has been ‘overly pessimistic’ and the property market is not heading for a crash. 

Despite the ‘gloomy outlook caused by rising rates and energy costs’, the housing market remains stable, it added.