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Low rates and muted price rises pre-Covid will protect against house price crash – Savills

  • 11/06/2021
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Low rates and muted price rises pre-Covid will protect against house price crash – Savills
The combination of low interest rates and muted price growth pre-pandemic will cushion the housing market against the risks of a future downturn, analysis by Savills showed.


The real estate group crunched Bank of England data to reveal that the total amount spent on mortgage interest was £29.6 billion in the year to 21 April 2021. Excluding the effect of mortgage payment holidays, it would have been £31.6 billion.

“When you combine the fact that we’re in this incredibly low interest rate environment, with the fact that price growth pre-pandemic was fairly muted, the total level of mortgage debt hasn’t risen that significantly — or at least, as significantly as it did in the run-up to the financial crisis in 2007,” said Lucian Cook, head of UK residential research at Savills (pictured).

Regular mortgage payments – mortgage interest plus capital repayments – were pegged at £78.7 billion, which is 19 per cent lower than their July 2008 peak, and about the same as in the year to June 2013.

Without mortgage holidays, regular repayments would have summed £83.9 billion, or 13 per cent below July 2008, and similar to the year ending July 2014. 

“This data looks to have been driven by more affluent buyers, who have been using equity to fund purchases, so they haven’t overstretched themselves. That’s important in the context of what happens next,” Cook said.

He added that calls for a relaxation to lending restrictions brought in after the financial crisis that have been rippling around the market in recent weeks, were likely to be given short shrift by the regulator.

“The mortgage regulators are going to be keen to avoid any kind of debt-driven housing market boom,” Cook said.

“Over the medium to longer-term rates are likely to rise — that’s almost exactly why mortgage regulation was put in place, to make sure people don’t overstretch themselves.

“The lessons of the credit crunch, going back 14 years, are ones that linger in the memory,” he added.

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