Rightmove says that there are signs that rising mortgage rates are impacting buyer demand, as the average price saw a slight increase this month.
The average price of a newly listed home rose by 1%, up £3,575 to £371,015. However, prices are virtually flat year-on-year, falling 0.1%, which Rightmove says shows that the market remains very price-sensitive.
Despite the monthly price rise, Rightmove found that rising mortgage rates are affecting sellers across the country, with newly listed homes in more affordable and previously resilient parts of Great Britain seeing lower asking prices as buyers face mounting affordability pressures.
The average two-year fixed mortgage rate has risen to 5.55%, up from 5.29% last month and 4.25% before the war in Iran started, which has added around £250 a month to the cost of a typical new mortgage since February.
As a result, new sellers in four of the five lowest-priced parts of Great Britain have set lower asking prices this month, including falls of 2.0% in the North East and 1.9% in Scotland.
In contrast, asking prices in London rose by 2.5% this month, showing some improvement after a 6% fall over the summer. However, prices remain 1.7% below last year, and Rightmove says that wider data indicators suggest that this month’s rise is not evidence of a broader recovery.
The Rightmove report says that the number of sales agreed is down 8% on the same period a year ago, however, this is broadly in line with the year-to-date, with deals still being done and sales activity showing surprising resilience despite higher mortgage rates.
The report also suggests that the upcoming Budget is adding a layer of uncertainty to decision-making, with some first-time buyers potentially holding off purchasing to wait for more detail on the Your First Home scheme, while others will be assessing what any announcements could mean for their wider household finances.
Colleen Babcock, Rightmove’s property expert, said: “The rapid rise in mortgage rates is really beginning to hit buyers’ budgets. We’re now seeing mortgage rate rises feed through to seller pricing in many of the cheaper parts of Great Britain, where prices had been more resilient this year. It’s an early sign that higher mortgage costs are putting pressure on affordability even in markets with lower property prices, affecting the areas and types of property that buyers can afford. This is a stark reminder of how price-sensitive the market is, and the message from agents, backed up by our data, remains the same – that competitive pricing from day one of marketing is critical to capitalise on initial buyer interest.”
“Higher mortgage rates are putting pressure on affordability across Great Britain, but sellers appear to be responding in different ways. Some have room to lower their expectations, while others need to hold firm on price to make their next move add up, even if that means waiting longer for a buyer. In such a price-sensitive market, the guidance and expertise of a local agent are paramount. The forthcoming Budget adds some uncertainty too, with financial markets hoping that will improve the outlook for interest rates, while potential home-movers will be waiting to see how they are directly or indirectly affected.”
Matt Smith, Rightmove’s mortgage expert, commented: “It’s been a difficult few weeks for home-buyers who have been watching mortgage rates rise quickly, particularly for those who had worked out what they could afford based on lower rates earlier in the year. Some buyers will understandably be reassessing their budget and what they can afford or feel comfortable borrowing.”
“The fact that sales activity hasn’t fallen back further so far shows that many people still want to get on with their move. Monthly budgets are going to be stretched, but the market is incredibly hard to predict particularly with so many complex global factors affecting the cost of borrowing, so home-movers must also concentrate on what’s in front of them. Whether it’s borrowing less, finding a larger deposit, or negotiating the price down on an onwards move to accept a lower offer, there could be options for home-movers to explore.”
