How the Cost of Living is Impacting the Housing Market

Throughout the Covid-19 pandemic, Brits across the country hoped that post-pandemic life would resume an element of normality. Perhaps there was a sense of hopefulness that the potential inflation regarding the cost of living would settle down, and that those who had faced hardships throughout the pandemic would be able to get back on their feet and recover from any losses. Yet since last year, the UK has experienced more financial adversity than life previously. 

In 2021, the UK housing market seemed to be on a booming trajectory. Statistics gathered by financial experts Money Week stated that throughout 2021, property sales across the UK were the highest they have been since 2007. The price of properties rose by almost double-digit rates, and it appeared as though market consumers were keen to get back on the property ladder in the wake of being confined to their homes throughout the pandemic.  

At the start of 2022, experts predicted that during this year, the UK property market would continue on and go further in a positive direction. There was expectations of increased buyer enquiries, more properties up for sale, and the demand for properties was set to exceed supply. However, at the beginning of the year, the UK government announced that there was set to be a rise in inflation- with the rate going up by 5.5%. This is the highest inflation rise ever to be recorded in the National Statistic series and has had dramatic consequences for homeowners and those looking to get on the property market.

Is housing still affordable now that the cost of living has risen? 

In February 2022, the average cost of a property in the UK rose by a significant 1.4%, which made house prices hit an astronomical high of £282,800. According to property experts at Halifax, this is an 11% increase in house prices, reiterating the staggering statistic that properties in the UK haven't been this expensive since the financial crisis of 2007. And as the UK has a burgeoning crisis regarding the cost of living, how is the average person expected to afford a house? The rising cost of living is a prominent and worrying issue, as every penny individuals are earning is eating into their disposable income, and alongside stagnant wages, it is making it near-impossible for people to save for a mortgage deposit while living a somewhat ‘normal’ life. 

However, a large majority of experts believe that the current rise in the cost of living is not enough to massively impact and dent the UK housing market, and unfortunately, those who are going to be impacted are those who are on the breadline and already struggling financially. Although the rising cost of living will inevitably cut into everyone's disposable income, it can be considered as temporary, as either the cost of living will be reduced or wages across the country will have to rise in order to match the new prices. Additionally, individuals who have access to savings will be able to bank on these further down the line. Overall, it seems as though the rising cost of living won't have a dramatic impact on the UK housing market, let alone stifle activity. Mortgage costs have stayed pretty much stagnant, and the only thing to potentially alter is the cost of credit.  

Currently, mortgage lenders are willing to lend money for significantly longer periods of time and offer more flexibility for borrowers. This means that ultimately, the housing market is going to continue to function, and that as a prospective buyer or seller, you shouldn’t waste time trying to judge the ‘perfect’ time to make a move or wait until this financial hurricane blows over. 

Back to all articles