UK Homes Face Stagnation as High Mortgage Rates Deter Buyers
A significant portion of properties listed since January remain unsold, with first-time buyers disproportionately affected by rising borrowing costs.
A substantial number of homes put on the market in the United Kingdom since the beginning of the year are struggling to sell, as elevated mortgage rates deter potential buyers. According to property portal Zoopla, three in five homes listed since January are still available, indicating a slowdown in the housing market. This lack of buyer demand, coupled with some high asking prices from sellers, has led to unsold properties in various regions.
Zoopla reported that agreed sales are down 7% compared to the previous year. The impact varies geographically, with sales declining by 12% in Wales and 11% in the East Midlands. First-time buyers appear to be the most vulnerable to the higher mortgage rates.
The surge in mortgage rates, particularly following financial market shifts linked to the conflict between Iran and Israel, added an average of £125 per month to typical mortgage payments at its peak compared to January. In London, this increase reached as high as £232 per month for the average first-time buyer. Data from financial information service Moneyfacts shows the average two-year fixed mortgage rate climbed from 4.83% in early March to a high of 5.90% on April 12, before settling at 5.54%.
This rise in borrowing costs contributed to a 15% decrease in buyer demand nationwide in the period leading up to the end of May, when compared to the previous year, according to Zoopla's analysis. However, the financial strain was less pronounced in the North East of England, where first-time buyer mortgage costs increased by only £66 per month over the same timeframe.
"The national picture can only tell you so much," noted Richard Donnell, executive director at Zoopla. "For sellers still waiting for an offer, the conversation to have is about price. Correctly priced homes are selling, while overpriced homes are sitting."
Donnell also pointed to recent reductions in mortgage rates as a positive development for prospective buyers. "For buyers, rates are falling, there is more choice of homes for sale than a year ago and motivated sellers are willing to negotiate. If you are ready to move, conditions are more favourable than they were three months ago," he said.