Homes harder to sell as high mortgage rates frustrate buyers
Homes harder to sell as high – Property platform Zoopla reported that over half of all properties listed for sale since January remain unsold, with high mortgage rates acting as a key barrier for potential buyers. This has led to a situation where demand is weak in certain areas, and some sellers are holding out for higher prices than what the market currently supports.
Agreed sales in the UK fell by 7% compared to last year, though the decline was more pronounced in Wales and the East Midlands, where sales dropped by 12% and 11% respectively. First-time buyers, particularly vulnerable to rising borrowing costs, have seen the most significant impact, though recent trends suggest lenders are becoming more competitive by reducing rates.
Mortgage Rate Fluctuations
A surge in mortgage rates in April, driven by financial instability from the US-Israeli conflict with Iran, added an average of £125 monthly to typical mortgage payments at its peak. In London, the increase reached £232 per month for first-time buyers. Moneyfacts noted that the average two-year fixed rate rose from 4.83% in early March to a high of 5.90% on 12 April, before decreasing to 5.54%.
According to Zoopla’s report, this rate increase was a major factor in reducing buyer demand by 15% compared to the previous year. However, in the north east of England, the monthly cost for first-time buyers only rose by £66 over the same period.
“The national picture can only tell you so much,” said Richard Donnell, executive director at Zoopla. “For sellers still waiting for an offer, the conversation to have is about price. Correctly priced homes are selling, while overpriced homes are sitting.”
Donnell highlighted that recent mortgage rate cuts are offering buyers more favorable conditions. “For buyers, rates are falling, there is more choice of homes for sale than a year ago, and motivated sellers are willing to negotiate,” he explained. “If you are ready to move, conditions are more favourable than they were three months ago.”
Estate Agent Insights
“Sales are taking much longer and it is proving increasingly difficult to generate commitment,” said Jeremy Leaf, a London-based estate agent. “However, the overwhelming majority of sales which have been agreed are proceeding, although inevitably more slowly.”
“Mortgage rates are just one of the factors affecting the housing market,” said Lucian Cook, head of residential research at Savills. “Firstly, you’ve got uncertainty about the outlook for the economy. Clearly, if people are concerned about their personal finances, then they’re less likely to move. We have also seen substantial regulatory reform in the private rented sector. That means some landlords have brought more stock to the market, shifting the balance between demand and supply.”
Meanwhile, the Bank of England noted that mortgage approvals for house purchases fell to a two-and-a-half year low in May, as deals were postponed and rates climbed. The reduced demand from first-time buyers, who face higher borrowing costs, has influenced the types of properties that remain unsold. Zoopla added that two-thirds of one- and two-bedroom flats listed this year have not yet found buyers.
Estate agents observed that homes for sale exceed demand across various price ranges. Uncertainty created by the financial impact of the Iran war and shifting political leadership in the UK has further complicated the market. However, the pace of sales for two- and three-bedroom homes has remained relatively stable.
A modern browser with JavaScript and a stable internet connection is required to view this interactive. At this rate, your payments could change by… monthly change to monthly total. This calculator does not constitute financial advice. It is based on a standard mortgage repayment formula dependent on the mortgage size and length, and a fixed interest rate. It should be used as a guide only and does not represent the suitability, eligibility, or availability of mortgage offers for users. Interest rates fluctuate based on the Bank of England’s base rate and market conditions.
