Energy price cap could bolster housing demand, brokers predict

Following Liz Truss's energy price cap announcement last week, some brokers have suggested that property market activity may start to tick up again now that people know what’s happening with their utility bills for the next two years — and that they are already seeing signs of this.

Related topics:  Mortgages
Rozi Jones
15th September 2022
a man looks at a coffee table covered with receipts and a calculator
"Even though the cost to heat and power our homes will be higher, there is at least certainty around bills for 24 months and that has boosted sentiment."

Newspage asked a number of brokers for their views on whether this certainty could stimulate demand.

Imran Hussain, director at Harmony Financial Services: "Following the Prime Minister's energy price cap announcement, I am finding there is more confidence among prospective buyers. Even though the cost to heat and power our homes will be higher, there is at least certainty around bills for 24 months and that has boosted sentiment. An increase of around £500 a year will be manageable for most, whereas an additional £1,000 would not have been. The economic outlook remains highly uncertain but at least people can now plan and budget for the two years ahead."

Lewis Shaw, founder and mortgage expert at Shaw Financial Services: "The certainty of knowing that energy bills are frozen at £2,500 is a good thing, but no one should be under any illusion that we’ve all got to pay for it in the longer term. We can’t escape reality, and we’ve two enormous white elephants in the UK economy. First, we’ve got a declining birth rate and an ageing population, which means tax rises, not cuts, to fund health, social care and pensions. Secondly, we’ve got huge public debt, and as rates rise, we have to allocate more budget to repayments leaving less for the services we need. Taken together, the longer-term outlook is bleak."

Sabrina Hall, mortgage and protection adviser at Kind Financial Services: "The impact of the energy price cap announced by Liz Truss on sentiment has definitely been overlooked. The biggest issue for homebuyers is uncertainty so the fact that we all now know what is happening with energy bills for the next two years will be a source of comfort to many people who were previously a little nervous of onward affordability. Most people are having to stretch their budgets at the moment so there is very little room for uncertainty."

Paul Neal, mortgage and equity release specialist at Missing Element Mortgage Services: "We are seeing as much demand for property as we saw earlier in the year. Rising energy bills don't appear to have fed through to buyer sentiment yet and the announcement of the energy price cap will help to support a degree of demand that may otherwise have dropped off. Bills will still be higher but at least there's a ceiling for 24 months."

Gindy Mathoon, mortgage broker at Create Finance: "I don't think the fact that people now have some certainty around the cost of their energy bills in the short term will impact the property market. The fact remains that we are only now exiting the summer months and in the summer, energy bills are lower. The reality of higher bills will hit home in the winter, and if homeowners find their outgoings to be unsustainable, then some downsizing may occur and an influx of properties may come onto the market."

Edgar Rayo, chief economist at Finanze: "The October price hike will still make a typical household energy bill higher by around £500 so affordability will remain an issue. In addition, the UK has a high number of mortgage holders whose fixed-rate contracts will expire soon and must brace for higher repayments. We expect the Bank of England to raise interest rates between 50 to 75 basis points, and further inch closer to the 3.25% threshold sometime in 2023. This makes it tougher for those who need to remortgage their properties and they will have to dig deeper into their pockets. There will be some sort of renewed confidence in some way, but it will come mainly from buyers who are pressured to act now to avoid higher mortgage costs in the coming months."

Mark Robinsonm, managing director at Albion Forest Mortgages: "I have seen no slow down in the housing market due to utility bills, so do not think this will change much. We may see some lenders tweaking their affordability calculators in the background to allow for this as they may have made changes anticipating the rises that are no longer needed. With rental prices going through the roof, more and more people are attempting to jump onto the property ladder. Even if that ladder is on fire it, many people think it's a better option than renting."

Ian Hewett, founder at The Bearded Mortgage Broker: "In many areas of the country, demand is still stronger than supply, but the energy price cap will help some people make a decision as to whether or not now is the right time for them to purchase or hold fire. The impact on remortgages is going to be the greater concern, with some low rate mortgages ending soon. New rates are increasing by percentage levels that Oliver Reed would shy away from. With current buyers, if it works for you now, then it's the right time to buy."

Samuel Mather-Holgate, IFA at Mather and Murray Financial: "Households now know where energy prices will be for two years, and that's sky high. Although there is certainty of price, the level at which the price cap was fixed will not install confidence back into a slowing housing market. Far from it. From next month, energy bills will drive a significant proportion of the population into fuel poverty, and with increases in fuel and food prices to add to this, it's not a good mix. It was good to see inflation fall from 10.1% to 9.9%, but that means prices are still that much higher than a year before. Falling inflation doesn't mean falling prices, just that prices are increasing at a slower rate. Until inflation is back at a normal level and the economy has gone into and come back out of recession, the housing market will only see slowing growth."

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