Estate agents are cautioning sellers against setting asking prices too high, as rising mortgage rates squeeze buyer budgets and intensify competition between properties. The warning follows Rightmove's latest House Price Index, which recorded a 1% increase in average asking prices in October to £371,015.
Despite the monthly rise, prices remain 0.1% below the same period last year. The average two-year fixed mortgage rate has climbed to 5.55%, while buyer enquiries have dropped 9% year-on-year and sales agreed have fallen 8%. At the same time, the number of homes available for sale has reached its highest October level since 2014.
Industry Reaction to Market Conditions
Jeremy Leaf, a north London estate agent and former RICS residential chairman, noted the impact of anticipated mortgage rate rises and Budget shocks on market confidence. "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," he said.
Leaf added that only sellers who recognise the importance of competitive asking prices are 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," he explained.
Geopolitical Factors and Buyer Uncertainty
Tom Bill, head of UK residential research at Knight Frank, pointed to the Middle East conflict as a key factor squeezing prices. "Prices will continue to be squeezed in the final months of the year as higher mortgage costs due to the Middle East conflict increasingly weigh on buyers," he said. He also cited uncertainty over potential property tax hikes in the Budget as aggravating the situation.
Tomer Aboody, founding director of specialist lender MT Finance, highlighted the combined effect of higher mortgage rates, a pending Budget, and the prospect of further taxes on banks. "Higher mortgage rates, a pending Budget and the prospect of further taxes – this time on the banks – is creating further uncertainty, lower sales and keeping a lid on values," he said.
Advice for Sellers and Buyers
Michael Donnachie, Director at Michael Anthony Village Estates, stressed the importance of getting the asking price right from the start. "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," he said.
Nathan Emerson, CEO of Propertymark, noted that while inflation has generally tracked downwards, it has yet to reach the Bank of England's 2% target. "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," he said.
Marc von Grundherr, director of Benham and Reeves in London, observed a seasonality effect and an "enough is enough" mentality among London sellers. He also mentioned that speculation around reducing the mansion tax threshold to £1.5m has ended, but owners of properties valued above £2 million still face an additional annual tax from April 2028. Von Grundherr concluded that stronger asking prices don't necessarily translate into stronger achieved prices, and sellers will still need to be realistic in a price-sensitive market.
