United Kingdom: Mortgage Market Update
This commentary provides an updated analysis of the United Kingdom’s mortgage market considering the impact from the coronavirus pandemic and current macro-economic changes such as inflation and rising interest rates.Summary highlights include:
-- House prices and borrower performance remained resilient during the pandemic period, with the former maintaining an upward trend and the latter reaching historical lows in terms of arrears. This remained the case during the first quarter of 2022.
-- The five consecutive interest rate raises by the Bank of England since December 2021 are gradually feeding in to mortgage rates in new origination, in particular those of a variable type, which increased by 44 basis points between December and April.
-- London’s substantially higher house prices paired with more stretched affordability metrics make it more vulnerable to a worsening of economic conditions.
“The appearance of inflation in the UK’s economy will stress the income of borrowers in the short term, particularly those most vulnerable, and will gradually feed in to higher borrowing costs which should cool mortgage demand, especially in London, which shows more stretched affordability levels. However, the historically low starting point for rates increase, limited housing supply, and tight labour market should prevent any extreme deviations in both house prices and borrowers’ ability to repay their mortgage debts. Nevertheless in our view, how inflation evolves during the year will be the key driver for the country's mortgage market performance”, said André Soutinho, Analyst of European RMBS and Covered Bonds at DBRS Morningstar.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.