Homes harder to sell as high mortgage rates frustrate buyers
Three in five homes listed for sale since January remain on the market as high mortgage rates frustrate potential buyers, according to property portal Zoopla.
Lack of demand from buyers and high prices from sellers caused houses in some areas to remain unsold.
Zoopla said agreed sales were 7% below last year, but the picture varied across the country, with a 12% drop in Wales and an 11% drop in the East Midlands.
First-time buyers were hardest hit by higher mortgage rates, but there are signs of more competition among lenders who are now cutting interest rates.
A rise in mortgage rates in April due to financial turmoil caused by the US-Israeli war with Iran added an average of £125 a month to typical mortgage rates at their peak compared to January.
In London, the peak saw £232 a month added to first-time buyers’ average costs.
The average two-year fixed rate rose to 5.90% on April 12 from 4.83% at the beginning of March, according to financial information service Moneyfacts. It has since fallen to 5.54%.
According to Zoopla’s report, which evaluated the market until the end of May, this increase was an important factor in the 15% decrease in demand from buyers in the United Kingdom compared to the previous year.
However, in the north-east of England, first-time homebuyers’ mortgage costs were only £66 per month higher over the same period.
“The national picture can only tell you so much,” said Richard Donnell, chief executive of Zoopla.
“The issue that needs to be discussed for sellers who are still waiting for an offer is the price. While the correctly priced houses are being sold, the overpriced houses remain in the middle.”
However, he pointed out that the recent reductions in mortgage loan interest rates are positive for buyers.
“Prices for buyers are falling, there are more options for homes for sale than there were a year ago, and motivated sellers are willing to negotiate. If you’re ready to move, conditions are more favorable than they were three months ago,” he said.
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Mortgage approvals for house purchases fell to a two-and-a-half-year low in May as deals were pulled from sale and interest rates rose, the Bank of England said.
The decline in demand from first-time buyers, who are most exposed to high borrowing costs, has had an impact on the types of homes that remain unsold.
Zoopla said two-thirds of one- and two-bedroom flats listed this year remained unsold.
But there was little change in the sales pace of two- and three-bedroom homes.
Zoopla said agreed sales also fell much lower in northern England and Scotland, where there were fewer homes for sale and less of a cash boost on mortgage costs.
