Nationwide reports that despite rate increases, mortgage applications are steady
According to Nationwide, despite interest rates reaching their highest point in 15 years, the number of mortgage applications has not yet decreased.
The building society warned that the sharp rise in borrowing costs would likely have a "significant drag" on the housing market's activity.
The largest decline in house prices since 2009, according to the most recent data from Nationwide, occurred in the year to June.
To reduce inflation, the Bank of England increased interest rates.
The Bank's base rate, which typically determines the cost of borrowing for lenders, is currently set at 5%.
The chief economist at Nationwide, Rob Gardner, told the BBC's Today programme that mortgage payments now account for nearly 40% of the average person's take-home pay, up from 30% previously.
Although the cost of borrowing money for longer terms had increased, Mr. Gardner stated in the most recent Nationwide report that it had "yet to have the same negative impact on sentiment.".
"For instance, the volume of mortgage applications has not yet decreased, and consumer confidence indicators have improved even though they are still below long-term averages. ".
According to data from the Bank of England, approvals of mortgage deals increased from 49,000 in April to 50,500 in May despite higher interest rates. Remortgage approvals also increased, from 32,500 to 33,600, during the same time frame.
Since most homeowners have fixed-rate mortgages, the effect of higher interest rates on mortgage holders is more gradual than in previous years. Only 15% of homeowners with mortgages are on contracts with variable rates, down from 70% 20 years ago.
Mr. Gardner claimed that 400,000 fixed-rate borrowers would be refinancing every three months, despite the fact that 85% of the stock of outstanding mortgages were fixed.
According to Mr. Gardner, a typical monthly payment would increase by £385 as a result of mortgage rates reaching 6 percent for a two-year deal.
Despite the fact that there has been a significant increase, he noted that the borrowers had undergone stress tests at interest rates higher than those currently dominating the market. This was done to make sure they could handle the increase.
According to Mr. Gardner, the UK is "unlikely to see the waves of forced selling which would probably be required to result in a more disorderly adjustment to the housing market" if the jobs market and interest rates perform "broadly as expected.". .
Remortgagers "face potentially disastrous rises in their monthly payments," according to Sarah Coles, head of personal finance at Hargreaves Lansdown.
People will be able to temporarily modify their mortgages under the new rules to get them through the next six months, but some will sell their homes because they don't see any relief in sight.
But according to Ms. Coles, there is "still hope" that the inflation rate will decline and mortgage rates will follow suit. .
According to Nationwide, all regions saw annual house price declines, with the exception of Northern Ireland. Prices fell 4.3 percent in London and 4.1 percent in the North West from year to year.