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The pace of sales in the UK property market has slackened over the summer, underlining the impact of higher mortgage rates and broader economic uncertainty on buyers’ appetite.
The number of sales agreed over the four weeks to July 19 fell by 9 per cent compared with the same period last year, according to property site Zoopla.
The site’s house price index — covering instead the calendar month of June — showed price growth had also slowed to 1.3 per cent, from 1.7 per cent at the same point last year.
Richard Donnell, executive director at Zoopla, said: “This summer has seen a sharper slowdown than usual, with higher mortgage rates and political uncertainty both weighing on buyer confidence.”
Mortgage rates were broadly stable last year, staying in a range between 4.1 and 4.3 per cent for a five-year fix at a loan-to-value ratio of 75 per cent. But the Iran war brought a sharp reaction from markets, leading rates to jump to around 5 per cent in April. They have since fallen back to around 4.75 per cent in July, Zoopla said.
“As a rule of thumb, the closer these mortgage rates are to 5 per cent, the bigger the impact on the housing market,” said Donnell.
Big mortgage lenders including HSBC, Barclays, Santander and Halifax (via brokers) raised their fixed mortgage rates this week.
Aaron Strutt, product director at broker Trinity Financial, said: “Mortgage rates have been going up for a while now, pretty much since the war in Iran started again. Some of the biggest lenders have raised their fixed and tracker rates twice in the space of a week.”
There was some regional variation in Zoopla’s measures of sales and house price inflation. North-east England was the only region to buck the trend of lower sales agreed, with a 4 per cent rise.
Over three-quarters of smaller local markets (76 per cent) registered fewer sales than a year ago. But among those with more sales agreed, Warrington, Hull and Dundee were at the top of the rank. At the other end were Bath, Oxford and Harrow, with fewer sales than last year. House prices in these areas were also flat or down.
The north-south divide suggested by Zoopla’s evidence is mainly explained by cost, it said. Prices were so much lower on average for homes in the north-east than in the south that the same rises in mortgage rates translated into a much smaller monthly cash repayment increase for northern buyers than for those elsewhere.
Zoopla collects data on the number of inquiries from buyers, tallying up those registering an interest in a particular property. These were down by 23 per cent year on year for the four-week period to July 19.
Data published on Wednesday by the Bank of England showed mortgage approvals rising to 58,200 in June from 56,600 in May. However, the average rate in the decade to 2023 was much higher, at around 65,000 to 68,000 a month. “The data shows there’s been a general weakening,” Donnell said.
The number of homes available for sale rose in all but three regions in the four-week period. Along with the drop in sales agreed, this showed all the hallmarks of a buyers’ market. “Buyers have more room to negotiate than they’ve had in some time,” Donnell said.
He warned that these conditions meant aspiring sellers who aimed to put their home on the market to benefit from the traditional “September bounce” in seasonal sales would need to settle on realistic and competitive prices, and to do so soon if they had an urgent need to move. “Our data shows . . . pricing to meet buyers now is what tends to get deals done, rather than waiting to see what autumn brings.”