Is it now a buyers market? Home sellers are cutting sales prices at the highest rate since before the pandemic as mortgage costs rise.
- Zoopla: 6% of homes listed for sale have had their sales price reduced by 5% or more
- This is the highest level since before the pandemic, according to the property’s site.
- Rising mortgage rates ‘will erode much of the gains’ from stamp duty changes
- Median sales prices rose 8.2% in the year to August to £258,100
The housing market is turning into a buyer’s market as rising mortgage rates are beginning to reduce purchasing power and demand, according to a new report.
Sellers are increasingly having to cut their sales prices, with reductions at the highest levels since before the pandemic, real estate website Zoopla said.
Six percent of homes currently listed for sale have seen their sales price reduced by 5 percent or more, their research found.
Although recent stamp duty cuts will make housing easier for some first-time buyers, Zoopla said rising mortgage rates will weigh on demand for homes next year.
Price cuts: Sale price reductions are at the highest levels since before the pandemic
“A rise in home values during the pandemic and rising mortgage rates means we face a sizable hit to household purchasing power for the rest of 2022 and into 2023,” said Zoopla CEO Richard Donnell.
“Changes to stamp duty are welcome and will stimulate some sectors of the market, but overall they are unlikely to offset the impact of higher mortgage rates on property activity,” he added.
The cost of a mortgage has risen significantly following successive increases in the Bank of England base rate, with average interest rates on five-year fixed mortgages hitting a seven-year high according to Moneyfacts.
Five-year fixed-term rates rose from 2.64% in December 2021 to 4.33% last week, and that was before the effect of the mini-budget and the fall in the pound were factored in.
A wave of major lenders withdrew mortgage deals from sale this week as financial markets were rattled by the volatile pound and expectations that the Bank of England might opt for a more aggressive rate hike.
The impact of higher mortgage rates on market activity is compounded by sizable increases in home prices during the pandemic.
“Stamp duty changes are welcome and will stimulate some sectors of the market but, overall, they are unlikely to offset the impact of higher mortgage rates on real estate activity.
Richard Donnell, Zoopla
Average sales prices rose a further 8.2 per cent, or £19,650, to £258,100 in the year to August, although the quarterly growth rate is slowing, Zoopla said.
While it saw no immediate signs of a major slowdown, the real estate portal said it had noticed a “clear upward trend” in the proportion of homes for sale whose sale prices fell by 5 percent or more during the spring and summer.
Currently, around 6 percent of the homes listed on its website have had their sales price adjusted downwards, the highest percentage since before the pandemic, Zoopla said.
While price reversal is a common seasonal trend in the fall, Zoopla added that given the current economic backdrop, “we see this as a move towards more of a buyer’s market after two years of a red-hot seller’s market.”
He added: “Looking forward, higher mortgage rates will have the biggest impact on activity in higher value markets and areas that have seen the largest price increases during the pandemic.”
Buyers in regional markets and first-time buyers in London and the southern regions, where houses are more expensive, will benefit from the increase in stamp duty thresholds announced last week.
But rising mortgage rates “will erode much of the gains” from stamp duty changes, according to Donnell.
Benham and Reeves director Marc von Grundherr said: “The market is now at an inflection point where house prices have continued to rise rapidly, but the reality for many buyers is that they can no longer stretch financially. “. .’