The housing market has had a difficult time stabilising since 2020, and has wrought havoc on several European markets. As highlighted by The Guardian, Sweden is the latest formerly solid economy to fall prey to the downsides of a volatile mortgage market, and signs in other European economies are hinting at a potential banking crisis. Across the English Channel, however, and sights are far rosier. While British housing and mortgage markets have not yet gained the sort of long-term stability that fosters increased lending and easier access to new buyers, there is a solidity about it that is making the UK a European leader, economically.
Looking to improve
Britain has been going through a cost of living crisis but this hasn’t stopped homeowners delving into their equity to help fund renovation and expansion projects. In the UK this is commonly achieved through the second charge mortgage instrument; as second charge mortgage broker ABC Finance highlights, this presents homeowners with the opportunity to add funding to their own projects while avoiding the higher interest rates attracted by personal loans. As there is an exchange of equity or at least the use of equity is collateral, there are risks, as highlighted by Times Money. However, the general uptake in second charge mortgages, which are considered by banks and brokers to be a far safer and lower risk option than unsecured debt, shows that there is confidence in the market which is positively impacting consumers.
Opening the doors
While new mortgage rates are lower than they have been historically, they have risen of late, as highlighted by Financial Times figures. With the UK government reluctant to spend their way out of a recession, and detax measures having disastrous impacts (as seen in the 2022 Kwarteng mini-budget), more impetus is being put out there to ask those with savings to spend. This is in contrast to the EU, where new legislation is pushing back lending, according to Reuters. Of particular note are new EU building rules, which one Italian banking executive has marked as likely to cause a retraction on new applications.
Stability for growth
The UK experienced sustained house price growth through 2021, as demand greatly outstripped stock and government borrowing put more money in the pockets of the type of family that were in a position to buy. Now, as Bloomberg highlights, those prices are likely to be subject to a slow puncture. Property price recessions are typically perceived as a negative in economic markets, but there is an argument that, in the UK, this will be a positive. For more purchases to happen, prices must deflate – and with that will come more lending.
A strong and resilient yet fiscally sound mortgage market is essential to a healthy modern economy. Risk must be kept low in the face of recession and other extraneous circumstances, but for growth, more impetus must be given to potential buyers. In that sense, the UK is moving forward – and providing food for thought in growth-averse European economies