Britain’s housing market is showing fresh signs of strain as some buyers may be saddled with an extra £244 payment each month, while thousands of sellers are struggling to shift their homes.
The latest snapshot of the property market reveals that three in five homes put up for sale since January remain unsold, as higher borrowing costs and political uncertainty combine to keep would-be buyers on the sidelines. Sales agreed over the past month are running 7% lower than a year ago, while the number of buyers entering the market has slumped 15% compared with last summer.
The figures, from Zoopla’s latest House Price Index, underline how the spike in mortgage rates earlier this spring continues to bite despite lenders beginning to trim the cost of fixed-rate deals.
£2,900 a year extra
For many households the biggest burden is the cost of borrowing. Mortgage rates climbed to around 5% in April, adding an average of £125 a month to repayments on a typical mortgage.
But the pain is far greater in expensive parts of the country. A typical London buyer is now paying around £244 more every month – almost £2,900 a year – than before rates rose.
Even first-time buyers are being squeezed, with those purchasing in London facing repayments around £232 a month higher, compared with an increase of just £66 in the North East. The figures help explain why southern England has cooled much faster than many northern markets.
Buyers sitting on their hands
Zoopla says many prospective purchasers are delaying moving plans because of affordability pressures and uncertainty over the economic outlook ahead of the Autumn Budget.
Although activity has slowed sharply, the downturn is nowhere near as severe as the market freeze that followed the 2022 mini-Budget, when sales briefly collapsed by more than 20%. Instead, buyers are becoming increasingly selective, with sellers having to work much harder 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 feeding through into house prices. Annual house price inflation has eased to 1.4%, with values still climbing strongly across northern England but falling 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 seeing values edge lower.
Sellers warned to be realistic
Estate agents say the days of simply putting a property on the market and expecting a bidding war have disappeared. 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 warned that those chasing last year’s values risk seeing their homes sit unsold for months.
Verona Frankish, chief executive of Yopa, said buyers had become “far more selective” as mortgage costs continue to stretch household budgets.
She added that getting the asking price right from the outset is now “more important than ever”.
Chris Hodgkinson, managing director of House Buyer Bureau, said sellers willing to price competitively were still achieving sales, while those hoping to maximise the price were finding their homes taking much longer to sell.
Some relief may be on the way
There is, however, some encouragement for buyers. Mortgage rates have begun edging lower since April, with average rates easing from around 5% to 4.8% as lenders compete more aggressively following expectations of further Bank of England interest rate cuts.
If borrowing costs continue to fall through the second half of the year, affordability should improve and housing market activity could begin to recover, although much will depend on wider economic confidence and future government tax decisions.