The sharp rise in interest rates has put the spotlight on the high cost of finding a home. Not only through more expensive mortgages, but also the knock-on effect with a steep rise in rents. Putting a roof over our heads makes the biggest dent in the monthly budget in many households, but in a cost-of-living crisis, where few of us have any spare case around, it has rarely been a more pressing challenge involving really difficult decisions. As Parliament Hill sees it, access to financial advice might just well be the most important membership benefit of all. Let's take a look at some of the hot issues right now.

Buy or rent?

The UK has often been described as a home-owning democracy: Brits seemed determined to buy where European cousins were happy to rent. In the 21st century, this is changing fast, with owner occupation in England falling from a share of 71% in 2000 to 64% in 2022. That's still some 15.7m households, but the direction of travel towards renting is clear with home ownership seen as increasingly unaffordable.

Bad news for homeowners – and then some

In July 2023, house prices were falling at their fastest rate for 12 years – according to Halifax. An annual fall of 2.6% was equal to around £7,500 being wiped off the average UK house price, the biggest drop since 2011. Prices for June fell for the third month in a row. Worse, the market expects values to continue dropping throughout 2023, with falls of up to 20% which, with inflation, means we could see falls of 30% in real terms.

The other bad news is the ticking time bomb of mortgage interest rates. Moneyfacts data for July shows an average two-year fixed rate mortgage has climbed to 6.54%, driven by rapidly rising interest rates. And the trend is likely to continue. The Bank of England (BoE) has raised interest rates fourteen times in a row, rising to 5.25% on 3rd August 2023, widely expected to go as high as 6% by the end of the year. And if that is not enough, the impact has not yet fully hit home, because many mortgage holders have fixed rate, fixed term mortgages and have not yet hit the wall. Typically, a 2-year fixed taken out in 2021 maturing in 2023 had a rate below 2%, but on maturity the new rate on offer at over 6% is a huge increase. Office of National Statistics data show more than 1.4 million UK households will be facing seriously large increases running into many hundreds of pounds, when they renew their mortgage in 2023. Ouch!

A tough world for renting

For those who want to rent, population growth means demand is soaring especially in city centres as students, office workers and international buyers make a return. Today, it's generally accepted there is scarcity in the rental market. There are more renters hunting a home than there are properties to rent. More are turning to rent because a deposit or mortgage to buy is impossible, and too few new properties are being built. That's not all. Because of changes in tax relief, investment strategies and a growing pool of second homes and short lets like Airbnb, the market is shrinking further. It means of course that rents are rising, and the rental market is very, very tough just now. Average UK rents passed £1,000 per month back in 2022 according to Zoopla and rents are still rising at their fastest pace for 14 years. Increases have been highest in London, soaring by over 17% in the year ending December 2022, but only 11% in Scotland and 9% in the North-East. In 2022 an average single renter was spending 37% of their income on housing, 18.5% for people who share. In London this jumped to 52% and 26% respectively and it is not getting any easier.

Member Benefit to cap all Member Benefits?

It's out there in plain sight. Putting a roof over our heads is our largest outgoing and this is why financial advice is likely becoming the most highly prized member benefit of all. Parliament Hill offers a wide range of these services, high value-added access to top quality financial advice on buying and renting. This includes a free offer for members to get 1-to-1 advice, and a range of insightful webinars on financial wellbeing. Mortgage advisers can help us shop around for the best deal, but also offer wise advice on a host of costly property-related outgoings like insurance and mortgage protection. That's not to forget we need a sound source of advice on an endless list of repairers, cleaners, gardeners, home insulators, energy advisors and security installers. It's got to be at the top of the list. Give it a try!

Author: Dr Mark Pegg, Director, Chalfont Associates