Mortgage costs have risen by an average of £1,800 a year since the start of the Iran war, according to analysis from housing website Zoopla. The increase has hit Britain's already weak property market, with flats proving particularly difficult to sell.
Zoopla's latest figures show a marked rise in homeowners looking to sell at the same time as buyer demand is cooling. One in four properties listed for sale this month has been on the market before, and six in 10 have come back at a lower price.
Sellers accepting lower offers
"Some sellers are accepting lower offers on homes while others are listing their homes at more realistic asking prices to attract buyers," Zoopla said.
Flats are proving especially hard to shift, with asking prices for apartments falling for the 15th month in a row. In London, a third of flats coming onto the market have been listed before, compared with fewer than one in 10 in Scotland. The average price of a flat in the East Midlands is now nearly 3% lower than a year ago, while in London the figure is down 2.6%.
Supply up, demand down
The number of homes for sale is 5% up on a year ago, while sales agreed over the past four weeks have tumbled by 9%. This imbalance is particularly acute in London and southern England, where the number of homes for sale is 8% higher than last year.
The housing market has been dented by a rise in mortgage rates since the start of the Middle East conflict at the end of February. Lenders have been increasing the cost of new fixed-rate mortgage deals on expectations that the Bank of England's base rate will stay higher for longer.
Mortgage rates at three-year high
Zoopla said mortgage rates now stood at a three-year high of 5.2%, up from 4% before the conflict erupted. The jump has added £150 a month - £1,800 a year - to the repayments of borrowers taking out a typical fixed-rate mortgage now, compared with if they had done so at the start of the year.
The rise has fed into weakness in property prices, with Zoopla reporting that growth has slowed to just 0.8%. House prices are rising fastest in Northern Ireland (6.7%) and North West England (3.6%) year on year, followed by Scotland (3%) and the North East (2.4%). Prices are down 0.3% year on year in south east England.
Richard Donnell, Executive Director at Zoopla, said: "The Middle East conflict has pushed up energy prices and mortgage rates, tempering the autumn rebound in housing activity."
"Borrowing costs are likely to remain elevated, with house price inflation drifting towards 0.5% by year-end and annual sales expected to be closer to 1.1 million versus 1.2 last year. While key measures of housing market activity are lower than last year, there is still plenty of demand for homes."
"Buyers are simply more cautious and selective about what they view and offer. Sellers who factor in local market conditions and seek detailed advice from their local estate agents on how to set the asking price, can still find a buyer relatively quickly."
"Getting the right price from the outset is essential. If you are selling an affordable two or three bed home in the North of England it is a strong market. The most challenging pricing decisions face sellers of flats and larger houses across southern England."
