Britain's property market is displaying fresh indicators of pressure as some purchasers could face an additional £244 monthly payment while thousands of vendors are finding it difficult to sell their properties.
Unsold Homes and Falling Sales
The most recent overview of the housing sector shows that three in five homes listed for sale since January haven't been sold, as elevated borrowing expenses and political instability combine to keep potential purchasers hesitant. Sales agreed during the past month are running 7% below last year's figures, while the number of purchasers entering the market has dropped 15% compared with last summer.
The data, from Zoopla's latest House Price Index, highlight how the surge in mortgage rates earlier this spring continues to impact despite lenders starting to reduce the cost of fixed-rate products.
£2,900 Annually Extra for Borrowers
For numerous households the greatest strain is the expense of borrowing. Mortgage rates climbed to approximately 5% in April, adding an average of £125 monthly to repayments on a typical mortgage. However, the burden is considerably greater in costly areas of the country. A typical London purchaser is now paying roughly £244 more each month - nearly £2,900 annually - than before rates increased.
Even first-time purchasers are being squeezed, with those buying in London facing repayments approximately £232 monthly higher, compared with an increase of just £66 in the North East. The figures help explain why southern England has cooled significantly faster than many northern markets.
Buyers Sitting on Their Hands
Zoopla reports that many prospective homeowners are putting their moving plans on hold due to affordability pressures and uncertainty surrounding the economic outlook ahead of the Autumn Budget. Although activity has dropped considerably, the slowdown is far less severe than the market freeze that followed the 2022 mini-Budget, when sales briefly plummeted by more than 20%. Instead, buyers are becoming increasingly choosy, with sellers having to put in considerably more effort to secure offers.
Richard Donnell, executive director at Zoopla, said: "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 added that conditions now vary sharply across the country. "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 Rising - But Only Just
The slowdown is also having a knock-on effect on house prices. Annual house price inflation has eased to 1.4%, with values still climbing strongly across northern England but declining once again in London. The North East and North West are recording annual growth of around 3.5%, while London has now posted its ninth consecutive month of annual price falls, with prices down 0.2% over the year. The South East is also witnessing values edging lower.
Sellers Urged to Adopt Realistic Approach
Estate agents say the era of simply listing a property and anticipating a bidding war 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 cautioned 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 strain household finances. She added that setting the correct asking price 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 finding their properties taking considerably longer to sell.
Some Respite May Be Approaching
There is, however, some positive news for buyers. Mortgage rates have started drifting lower since April, with average rates easing from approximately 5% to 4.8% as lenders compete more vigorously following expectations of additional Bank of England interest rate reductions. Should borrowing costs continue declining through the second half of the year, affordability ought to improve and housing market activity could start to pick up, though much will hinge on broader economic confidence and future government tax policies.
