Tom Bill, head of UK residential research at Knight Frank:
“The housing market has largely shrugged off the end of the stamp duty holiday and price growth continues to apparently defy economic gravity. Stronger-than-normal demand has been boosted by frustrated buyers who were unable to move during the stamp duty holiday and others who have waited for calmer conditions after its conclusion. Lower-than-normal supply will only pick up meaningfully next spring given how seasonal the UK housing market is. This supply/demand imbalance will support prices in the meantime.
Ultra-low borrowing costs also have also underpinned demand. Longer term, there will need to be a readjustment as mortgage rates normalise, a process that has been delayed by the pandemic. Interest rates were 0.75% in early 2020 before Covid struck and we wouldn’t expect any meaningful impact on prices or demand while they remain below that level. However, what’s different between now and early 2020 is the higher cost of living, which may cause demand to start fraying around the edges depending on how elastic the definition of “transitory” becomes in relation to inflation.
Over 3.5 million first-time buyer mortgages have been issued since the base rate dropped to 0.5% in March 2009. That is a large group of homeowners who don’t know what it’s like when interest payments rise meaningfully.”