The United Kingdom's property market is experiencing a significant slowdown, with mortgage approvals dropping to their lowest level since December 2023. Data from the Bank of England indicates that only 56,205 mortgages were approved last month, a decrease from 66,034 in April. This cooling demand is attributed to a combination of higher borrowing costs and political uncertainty surrounding potential property tax reforms.
Research from property website Zoopla reveals that nearly 60 percent of homes listed for sale since January have yet to attract a buyer, and overall house sales have declined by 7 percent year-on-year. The report highlights that elevated mortgage rates and political uncertainty have reduced the number of committed homebuyers, with recent shifts in leadership and questions about future tax policies contributing to market hesitancy.
Industry experts are warning of a potentially slower summer, fueled by speculation about potential property tax changes. Tom Bill, head of UK residential research at Knight Frank, noted that a summer dominated by tax speculation could dampen demand for the second consecutive year. He added that the market's spring recovery was cut short by increased mortgage costs, potentially preventing buyers and sellers from fully re-engaging.
House prices have seen a modest increase of 1.4 percent over the past year, but a notable North-South divide is emerging. While prices in northern regions have risen by 3.5 percent, London has experienced a nine-month consecutive decline in house prices. Zoopla data indicates that higher borrowing costs have added an average of £125 per month to mortgage payments, equating to £1,500 annually. However, this impact is more pronounced in London and the South, where buyers face monthly increases exceeding £244, compared to approximately £69 in the North East.
This disparity in mortgage cost increases correlates with regional sales performance. The North East and Scotland have seen sales decrease by 3 percent and 4 percent, respectively. In contrast, London has experienced a 9 percent drop in sales, with the East of England and South West seeing a 10 percent decline. The East Midlands and Wales have recorded the steepest falls, with sales down 11 percent and 12 percent, respectively. Richard Donnell, executive director at Zoopla, stated that higher mortgage rates, coupled with increased political uncertainty, have negatively impacted sales and squeezed affordability.