Market Stress Intensifies
Britain's property market is displaying worrying new signs of stress, with some buyers potentially facing an additional £244 per month in costs while thousands of sellers are finding it increasingly difficult to offload their homes. The most recent overview of the housing market reveals that three in five properties listed for sale since January remain unsold, as elevated borrowing costs and political uncertainty continue to deter prospective buyers.
Sales agreed over the past month are running 7% below last year's figures, while the number of buyers entering the market has fallen 15% compared with last summer. The data, drawn from Zoopla's latest House Price Index, highlights how the surge in mortgage rates earlier this spring continues to take its toll, despite lenders beginning to cut the cost of fixed-rate deals.
£2,900 a Year Extra for Londoners
For many households, borrowing costs represent the heaviest burden. Mortgage rates climbed to around 5% in April, adding an average of £125 a month to repayments on a typical mortgage. However, the pressure is considerably more acute in pricier parts of the country. A typical London buyer is now forking out around £244 more each month - almost £2,900 a year - compared with before rates increased.
Even first-time buyers are feeling the squeeze, with those purchasing in London facing repayments around £232 a month higher, set against a rise of just £66 in the North East. These figures go some way to explaining why southern England has cooled considerably faster than many northern markets.
Buyers Holding Back
Zoopla reports that many would-be purchasers are postponing their moving plans due to affordability constraints and uncertainty surrounding the economic outlook in the lead-up to the Autumn Budget. While activity has declined significantly, the slowdown is far less dramatic than the market standstill that followed the 2022 mini-Budget, when sales temporarily plummeted by more than 20%. Rather, buyers are becoming more discerning, with sellers needing to put in considerably more effort to attract offers.
Richard Donnell, executive director at Zoopla, commented: "Higher mortgage rates have hit sales and squeezed affordability for home buyers alongside increased political uncertainty. The impact is less severe than what the market faced after the 2022 mini-budget, and mortgage rates have started to fall." He noted that conditions now differ markedly across the nation. "It's a buyer's market across much of the South right now, but motivated sellers in northern England and Scotland are still finding buyers at broadly last year's pace."
House Prices Edge Up Only Marginally
The deceleration is also impacting house prices. Annual house price growth has moderated to 1.4%, with values continuing to rise steadily across northern England but declining once more in London. The North East and North West are experiencing annual growth of approximately 3.5%, while London has now recorded its ninth successive month of annual price decreases, with prices down 0.2% over the year. The South East is also witnessing values dip slightly.
Sellers Urged to Be Realistic
Estate agents say the era of simply listing a property and expecting multiple offers has ended. Marc von Grundherr, director at Benham and Reeves, said affordability had become "the defining force" in today's market. He said sellers "can no longer rely on yesterday's pricing" and warned that those pursuing last year's valuations risk their properties remaining unsold for months.
Verona Frankish, chief executive of Yopa, said buyers had become "far more selective" as mortgage costs continue to stretch household budgets. She added that setting the asking price correctly from the start is now "more important than ever". Chris Hodgkinson, managing director of House Buyer Bureau, said sellers prepared to price competitively were still securing sales, while those attempting to maximise the price were discovering their homes taking considerably longer to sell.
Some Relief on the Horizon
There is, however, some positive news for buyers. Mortgage rates have started to edge lower since April, with average rates dropping from around 5% to 4.8% as lenders compete more fiercely following expectations of further Bank of England interest rate reductions. If borrowing costs continue to decline through the second half of the year, affordability should improve and housing market activity could start to pick up, although much will depend on broader economic confidence and future government tax policies.
