The Mortgage Market Will Not Implode

Much of the reporting on the mortgage market has been scaremongering.?

After all, what quicker way to get someone to read an article than to tell them they are going broke…?

But as I have revealed in my Prime London Property Trends Letters, the reality is nowhere near as dramatic which is why we haven’t seen the dramatic price falls most pundits were predicting. Indeed, Deutsche Bank have also weighed in on this subject in a recent note:?

Are mortgage rates really a problem?

The outlook for households with a mortgage is not as bleak as it feels even as mortgage rates exceed 6%. Mortgage holders could even see stable disposable income with the current level of wage growth. The negative impact of high mortgage rates on households is headline grabbing but we doubt in reality it will make much difference to asset quality for banks.?

Mortgage structure protects households.??It takes multiple years for the current level of rates to filter fully into the entire mortgage stock. The rise in duration of mortgages means that by end 2024 we expect the total stock of mortgages will only yield c.4.1%, not fully incorporating the c.6% mortgage rates currently in the market.?

Real household income could actually rise.?Real income could potentially rise for the average household with a mortgage. The BOE recently revised real household disposable income growth into positive territory due to lower energy prices, higher employment and higher wage growth. We estimate that wages need only grow c.6%p.a. to offset the negative impact of inflation and higher mortgage payments - which is in line with current growth rates.?

Of course, the doom-mongers could be proven right, but their track record is embarrassingly bad.?

I will reveal more in my next Prime London Property trends Letter which is only available to subscribers. If you wish to request a complimentary copy of my next Trends Letter, simply message me here or email my assistant at [email protected].