High Interest Rates and Inflation... UK's Dream of Homeownership Drifts Further Away

Halifax Survey
Londoners' First Home Purchase Down 10% Compared to 10 Years Ago

In London, the capital of the United Kingdom, first-time home purchases have decreased by about 10% compared to 10 years ago. The rise in borrowing costs due to high interest rates, along with increased household burdens caused by soaring inflation, has led to a decline in home purchases.

On the 26th (local time), Bloomberg News reported, citing Halifax, the UK's largest mortgage lender, that 24,323 people purchased their first home in London from January to August this year. This represents a decrease of about 9% compared to 2013, ten years ago. London was also the only region in the UK where the number of first-time homebuyers declined compared to a decade ago.

Although the movement of London residents to buy their first home has noticeably decreased, it is difficult to view this as a problem unique to London. Compared to a year ago, this trend is seen across the UK real estate market, not just in London. According to Halifax, first-time home purchases by UK residents from January to August this year fell by 22% compared to the same period last year.

This is interpreted as the combined effect of the Bank of England's (BOE) interest rate hikes, the housing market downturn, and inflation. The BOE has raised the base interest rate from 0% since December 2021 to the current 5.25%. Although the UK's consumer price inflation rate in August dropped to 6.7%, the lowest in 18 months, it remains significantly above the target rate of 2%.

In particular, the sharp rise in prices has greatly increased household living expenses. This has led to a decrease in deposits and savings, which in turn has had a ripple effect on the housing market. As a result, Halifax analyzed that the average house price in the UK fell by 2% compared to last year, standing at ?288,030 (approximately 474 million KRW). Halifax explained, "High interest rates and inflation are spreading London's problems to the rest of the UK real estate market."

Bloomberg News stated, "Households' ability to save is decreasing, and those trying to buy their first home can no longer afford to live in London," adding, "Pressure on the UK real estate market is increasing."