Following concern that mortgages will start to become more expensive for homeowners, the new AA study suggests rising interest rates will dampen consumer appetite for moving home. In contrast to the many house price studies which track historic house prices, the new AA study looks 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, suggested a summer high in property confidence, with a rise in proportion of people planning to move home in very short term (three months) before September as well as;
- average planned spend on a new home up to an average of £320,736 (from £312,702 in April);
- a swing from renting to buying as movers head south;
- 20% of under 25s planning to buy their next home – up from 13%.
David Searle, Managing Director at AA Financial Services commented: “After years of record low interest rates, last week’s rise - and indications that more is yet to come – mean that the cost of buying a home is going to get more expensive. 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.”
Top 10 findings from the AA’s research in July 2018
Plans to move by September: Overall, in July 2018, 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%. Two days after last week’s interest rate rise, the figures fell to 4% planning a move in three months and 6% in six months.
Renters to buyers: Despite concerns over property supply, the AA research in July 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.
Target buy price: Set against reports that UK house prices are rising at the slowest rate since March 2013, the AA study reported a rise in target buy price that movers had available in July – an average of £320,736, up from £312,702 in April.
Young buyers: 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.
Regional uplift: Compared to three months ago, planned spend had increased in all regions, apart from the North and Scotland, regions which saw a fall.
Millionaire movers: People in the Midlands planning a move (within the region or further afield) were proportionately most likely to have £1 million or more budgeted for purchasing their next home (4%). The national average was 2%.
Best price movers: 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.
Regions on the move: People in London (7%) and the East Midlands (7%) were most likely to be planning a move in the next 3 months. Regions where people were most likely to be imminently planning a move in the spring – Yorkshire, the North West and the East - saw a slight fall, whilst moving plans rose in the other regions.
Most popular destinations: Those moving home were gravitating south – London (16%), the South West (13%) and South East (12%) proving to be the most popular destinations for movers. London has replaced the South East as the most popular destination since the spring (rising from 11% to 16%). This summer, the North East emerged as the least popular place to move to.
Moving close to home: The locations where movers are most likely to be moving locally within their region were the West Midlands (76%), Scotland (72%) and East Midlands (71%). The region people were most likely to move away from was the East (48%).
David Searle, commented: “Whilst many look at house prices, we are interested in looking at people’s plans to move in the future, what drives the decisions on when and where to move. 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.
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. It is now a time for those moving home to shop around for a mortgage deal that works for them and is sustainable in the longer term. Whether people are taking out personal loans to improve their home, or looking for a mortgage deal to help them buy their next home, the AA is here to help and we encourage people to challenge us to beat the deal they may already have.”
