"Many people think that interest rates are what really determine the mortgage market – and whilst that’s true to some extent, for me, the biggest driver is confidence"
- Mark Arnold - Barclays
The latest Barclays Property Insights report found that growth in rent and mortgage spending slowed to the lowest rate in 17 months, following the Bank of England’s base rate reduction on 1 August.
In response, consumers are feeling more confident in their household finances, though some concerns around rent and mortgage affordability remain. Meanwhile, the housing supply for renters continues to be an issue, with the influx of students into the market adding to the competition for younger house hunters.
Spending on rent and mortgages grew by just 1.1% in August, the lowest rate recorded since March 2023. This follows the Bank of England’s decision to drop the base rate by 0.25% earlier in the month.
For now, Brits are saving on costs through their bills, as warmer weather coupled with the Ofgem energy price cap resulted in the fourth consecutive month of falling utility spending, dropping -11.4% year-on-year.
Amidst the easing of some of these financial pressures and reduced inflation, the proportion of consumers confident in their household finances hit 70 per cent for the first time since April this year, up from 65 per cent in July. Confidence in the UK housing market has also risen, increasing from 25% to 29% in the same four-month period.
However, with 78% of mortgage holders reporting they have a fixed-rate deal, only a small proportion of consumers will be feeling the benefits of recent interest rate reductions. This is reflected in the marginal decrease in those not confident in their ability to afford rental or mortgage payments, which dropped from 16% to 15% month-on-month.
Freshers frenzy
For renters, competition for properties is an ongoing struggle. For the fourth month in a row, 20% reported getting less value for their money due to high demand. Amongst the 18-34-year-old group this rises to over a quarter (26%).
Young renters are also facing additional pressures as students enter the market for the new academic term, with more than one in six (17%) saying the influx of students is causing too much competition for properties. Given the extra squeeze on housing supply, only 14% of 18-34-year-old homeowners say they are considering selling their home, with many opting to retrofit instead, as three in 10 (28%) say they are making improvements to their home to make it more energy efficient.
Good weather brings greener thumbs
Spending at garden centres reached record growth for this year, up 8.0%, as the long-awaited improvement in weather resulted in people choosing to spruce up their gardens in August. As more people spent time out of doors, home improvements & DIY were down -5.7%, though many – particularly younger people – intended to get started on projects once Autumn begins, with 18% of 18-34-year-olds saying they are beginning home improvements ahead of the Christmas period.
Mark Arnold, Head of Mortgages and Savings at Barclays, said: “In the year to date we’ve seen encouraging signs that spending on rent and mortgages is decelerating on the whole, but unsurprisingly it isn’t a linear descent and we could see some volatility over the coming months, despite the recent interest rate cut.
“Many people think that interest rates are what really determine the mortgage market – and whilst that’s true to some extent, for me, the biggest driver is confidence. If you're going to make the biggest purchase of your life, you need to be confident that the economy is stable, inflation is under control, and you know what you're going to pay. That stability and confidence will determine how people spend, even for renters.”
Phil Spencer, TV Property Expert, said: “As we head into the Autumn, there are a number of seasonal impacts to the property market which can prove to be a sticking point for consumers trying to move. Particularly for renters living in university towns, timing is everything as over the coming weeks many students will be entering the market to find accommodation near to their classes.
“Landlords too might want to consider how and when they advertise their properties – though September might bring plenty of candidates if you are looking for a longer-term tenant, it could be worth waiting for a few weeks until the back-to-school flurry calms down.”
