Demand for homes is plummeting by almost half after mortgage costs hit a 15-year high after the average two-year fixed deal reached almost 7% this week.
Estate agents have reported a significant drop in buyer inquiries and newly agreed sales, according to the Royal Institution of Chartered Surveyors, while the Bank of England warned that nearly a million homeowners could be paying an additional £500 a month if remortgaging before the end of 2026.
The rental market is simultaneously facing significant hurdles after mortgage rates for buy-to-let landlords reached a 12-year high, with private rent rising by 5%.
The worsening mortgage crisis has halted demand, with the rising cost of living leaving prospective homebuyers locked out of homeownership and stuck in limbo as a result. Shahram Shaida, CEO and founder of home-buying and property investment platform, Allbricks, calls this ‘Generation Stuck’, whereby homebuyers are simply priced out of the market without any hope of getting onto the housing ladder.
This comes after Uswitch revealed the average age of first-time buyers increased to 33.5 – 1.3 years higher than two years earlier – indicating an increasingly exclusive market limited to those only with generational wealth.
Now, Shaida explains that it’s crucial to lean on new, and more affordable, routes to homeownership – ones that don’t require exposure to interest rate fluctuations – to ensure that the housing market doesn’t reach breaking point.
UK homeowners are set to spend an alarming £9bn more purely on interest between 2023-24, according to the Centre for Economics and Business Research. Data from Knight Frank additionally reveals a concerning 41% are now locking in variable rate deals due to concerns over a further hike in borrowing costs. Shaida warns that this could be a cause for concern, with the volatility of the current market meaning rates could eventually fall and leave many stuck with a mortgage they simply can’t afford.
Shahram Shaida, CEO and founder of Allbricks said, “Jeremy Hunt on behalf of the government, openly asked the banks to make a change in their operating practices in June. However, the reality is while banks aren’t passing on the interest rate hikes to our saving accounts, they are very quick to raise our mortgage rates. Ultimately, banks don’t have to pass on the interest rate hikes to consumers, but as the rate hikes enable them to make a lot of money, they aren’t incentivised to do otherwise. And therein lies the problem.
“Unfortunately, interest rate hikes are a blunt instrument to adjust the economy that on the whole, negatively impacts anyone with a mortgage. Rising interest rates only hits 1/3 of the UK population – the mortgage holders, which seems incredibly unfair.
“100% Mortgages are just a marketing ploy. This isn’t the first time they were highlighted but the fact is years after being launched very few if any mortgages were actually issued. The challenges these mortgages come with are blatantly obvious. With our current market and house prices declining, your chances of getting immediately into a negative equity situation are almost guaranteed.
“Why, when interest rates are rising, would you knowingly subject anyone to this, it’s almost criminal in nature. We have to start creating a system that supports each other rather than one that looks to take advantage of those most at risk. We can have a real estate market that enables everyone, not just the one per cent of the one-percenters, the opportunity to benefit.
“Unlike a mortgage, Allbricks avoids negative equity because we are not leveraged. There is no loan and no debt. You’ll never owe more than you own.”