Homes Harder to Sell Amid High Mortgage Rates
Three in five homes listed for sale since January remain unsold, according to property portal Zoopla, as elevated mortgage rates deter potential buyers.
A combination of weak buyer demand and elevated asking prices in certain areas has resulted in many homes remaining on the market.
Zoopla reported that agreed sales were 7% lower than last year, with regional variations including a 12% decline in Wales and an 11% drop in the East Midlands.
First-time buyers have been particularly affected by high mortgage rates, though recent signs indicate increased competition among lenders who are beginning to reduce rates.
Mortgage rates surged in April due to financial instability linked to the US-Israeli conflict with Iran, adding an average of £125 per month to a typical mortgage payment at its peak compared to January.
In London, this peak increase amounted to £232 monthly added costs for the average first-time buyer.
According to financial information provider Moneyfacts, the average two-year fixed mortgage rate rose from 4.83% in early March to a peak of 5.90% on 12 April, before falling to 5.54%.
This rise in rates was a significant factor in reducing buyer demand in the UK by 15% year-on-year, based on Zoopla's market analysis through the end of May.
However, in the North East of England, first-time buyers faced a smaller increase in mortgage costs, averaging £66 more per month during the same period.
"The national picture can only tell you so much," said Richard Donnell, executive director at Zoopla.
"For sellers still waiting for an offer, the conversation to have is about price. Correctly priced homes are selling, while overpriced homes are sitting."
Donnell also noted that recent mortgage rate reductions are encouraging for buyers.
"For buyers, rates are falling, there is more choice of homes for sale than a year ago and motivated sellers are willing to negotiate. If you are ready to move, conditions are more favourable than they were three months ago," he said.
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Interest rates fluctuate according to the Bank of England's base rate and market conditions.
The Bank of England reported that mortgage approvals for house purchases dropped to a two-and-a-half-year low in May, as sales were withdrawn and rates increased.
The decline in demand from first-time buyers, who are most vulnerable to higher borrowing costs, has influenced the types of homes remaining unsold.
Zoopla indicated that two-thirds of one- and two-bedroom flats listed this year remain unsold.
Conversely, the sales pace for two- and three-bedroom homes has remained relatively stable.
Agreed sales have declined less sharply in northern England and Scotland, where fewer homes are available and mortgage cost increases have been smaller in cash terms, Zoopla added.
Estate agents report that homes for sale exceed buyer demand across various price segments.
Market uncertainty has been exacerbated by the financial consequences of the Iran conflict and shifting political leadership in the UK.
"Sales are taking much longer and it is proving increasingly difficult to generate commitment," said Jeremy Leaf, an estate agent in north London.
"However, the overwhelming majority of sales which have been agreed are proceeding, although inevitably more slowly."
