Soaring mortgage rates are beginning to feed through into asking prices in some of Britain’s previously more resilient housing markets, according to Rightmove.
The average price of a newly listed home rose 1% this month to £371,015 but remains 0.1% below a year ago as affordability pressures continue to constrain the market.
New sellers cut asking prices in four of the five lowest-priced regions, including falls of 2% in the North East and 1.9% in Scotland. The shift comes as the average two-year fixed mortgage rate has risen to 5.55%, from 5.29% last month and 4.25% before the war in Iran began in February.
Rightmove estimates the increase has added around £250 a month to the cost of a typical new mortgage since February.
AFFORDABILITY PRESSURE
Wales recorded a 0.3% fall in new seller asking prices this month and the North West was down 0.6%, while Yorkshire and the Humber bucked the trend with a 0.3% increase.
Rightmove Property Expert Colleen Babcock (main picture, inset) says: “The rapid rise in mortgage rates is really beginning to hit buyers’ budgets. We’re now seeing mortgage rate rises feed through to seller pricing in many of the cheaper parts of Great Britain, where prices had been more resilient this year.
“It’s an early sign that higher mortgage costs are putting pressure on affordability even in markets with lower property prices, affecting the areas and types of property that buyers can afford.
“This is a stark reminder of how price-sensitive the market is, and the message from agents, backed up by our data, remains the same – that competitive pricing from day one of marketing is critical to capitalise on initial buyer interest.”
Sales agreed are running 8% below the same period last year, although Rightmove says this is broadly in line with the year-to-date trend.
The number of prospective buyers contacting agents is 9% lower year-on-year while new listings are 3% higher.
The total number of homes available for sale is now at its highest level for this time of year since 2014.
LONDON REBOUND
London bucked the wider trend this month, with average new seller asking prices rising 2.5%.
However, the increase follows a 6% fall across July and August and leaves prices 1.7% below last year.
Inner London asking prices increased 3.9% this month, contributing to the overall rise in the capital.
But other indicators remain weak. Some 38% of London listings have been reduced, homes are taking an average of 78 days to find a buyer and just 42% successfully secure one.
Babcock says: “Higher mortgage rates are putting pressure on affordability across Great Britain, but sellers appear to be responding in different ways. Some have room to lower their expectations, while others need to hold firm on price to make their next move add up, even if that means waiting longer for a buyer.
“In such a price-sensitive market, the guidance and expertise of a local agent are paramount. The forthcoming Budget adds some uncertainty too, with financial markets hoping that will improve the outlook for interest rates, while potential home-movers will be waiting to see how they are directly or indirectly affected.”
SALES REMAIN RESILIENT
Rightmove Mortgage Expert Matt Smith says: “It’s been a difficult few weeks for home-buyers who have been watching mortgage rates rise quickly, particularly for those who had worked out what they could afford based on lower rates earlier in the year. Some buyers will understandably be reassessing their budget and what they can afford or feel comfortable borrowing.
“The fact that sales activity hasn’t fallen back further so far shows that many people still want to get on with their move. Monthly budgets are going to be stretched, but the market is incredibly hard to predict particularly with so many complex global factors affecting the cost of borrowing, so home-movers must also concentrate on what’s in front of them.
“Whether it’s borrowing less, finding a larger deposit, or negotiating the price down on an onwards move to accept a lower offer, there could be options for home-movers to explore.”
“Much will depend on how inflation, interest rates and mortgage affordability evolve.”
Nathan Emerson, CEO of Propertymark, says: “As we head towards the end of the year, it is fair to acknowledge some of the many challenges the housing market has faced. Although inflation has generally tracked downwards, it has yet to reach the desired 2% target that the Bank of England has long aimed for.
“This in turn has contributed to the base rate remaining higher than many would like to see and has influenced the cost and availability of mortgage deals currently on offer. For prospective buyers, this can make it more difficult to establish what is realistically affordable monthly.
“While house price growth has been changeable throughout the year, underlying demand remains, with many consumers waiting for the most opportune moment to consider making a move. Looking ahead, much will likely depend on how inflation, interest rates and mortgage affordability evolve over the coming months and into the new year.”
Michael Donnachie, Director at Michael Anthony Village Estates in Aylesbury says: “With mortgage rates rising buyers are having to be more considered about what they can afford and what represents good value. That makes getting the asking price right from day one incredibly important.
“You never get a second chance to make a first impression. Price too high and you can quickly lose momentum, particularly in a market where buyers have plenty of choice.
“Once a property has been sitting on the market for a while, buyers naturally start to question why. You’ve lost that chance to capture your audience; the best price is usually the first price.
“Sellers need to be realistic and listen to the market. An experienced agent will know where buyers are, how to negotiate when issues come up through surveys, and how to keep a sale moving.
“One thing I’m reminding buyers and sellers of right now, is to focus on, can you afford it and does it fit your needs. The economics of a home buy are important, but for a family home you’re going to spend 20 years in, it’s worth looking longer term and not just at the inevitable ups and downs of the market.”
“There’s certainly an element of seasonality at play.”
Marc von Grundherr, Director of Benham and Reeves in London commented: “There’s certainly an element of seasonality at play, with the summer firmly behind us and the London market gearing up for one final push before Christmas.
“However, we’re also seeing something of an ‘enough is enough’ mentality among London sellers, many of whom recognise that while the market has been subdued this year, London bricks and mortar remain one of the strongest assets they can hold. For these homeowners, selling for anything less than what they consider a reasonable price simply isn’t a sensible move, particularly if they have little urgency to sell.
“There’s also a degree of renewed optimism surrounding the Autumn Budget, with the prospect of further government measures to stimulate the housing market helping to improve sentiment, even if the finer details remain unclear.
“At the top end of the market, we also have the looming mansion tax to consider. While speculation around reducing the threshold to £1.5 million has now been put to bed, owners of properties valued above £2 million still face an additional annual tax from April 2028.
“This could well be encouraging some higher-value London homeowners to bring forward their selling plans, with a greater concentration of these properties coming to market also helping to push the capital’s average asking price higher.
“Of course, stronger asking prices don’t necessarily translate into stronger achieved prices, and sellers will still need to be realistic if they want to secure a buyer in what remains a relatively price-sensitive market.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says:
“It’s been clear in our offices for several months now that the double whammy of expected mortgage rate rises and shocks in the Budget is compromising confidence and activity.
“In such a sensitive market we are finding only sellers who recognise the importance of competitive asking prices are standing out from the crowd and succeeding in finding a buyer.
“Sales are gaining a little more momentum, and few are failing. However, before committing, buyers want to be sure they’re building in sufficient headroom to cover for foreseen, and unforeseen, contingencies, which is making momentum even harder to build.”
