Red hot mortgage rates are leading to sellers accepting lower prices for their properties, fresh data shows, creating further pain for the housing sector.
As the market continues to grapple with the Bank of England’s recent 0.5 per cent interest rate hike, figures by estate agent Zoopla show that 42 per cent of sellers are accepting discounts over five per cent on the asking price to secure a sale – the biggest discount recorded by the estate agent since 2018.
Meanwhile, 15 per cent of property sellers are knocking over 10 per cent off initial asking prices.
It comes as sky-high interest rates on mortgages erode buyers’ purchasing power, with Zoopla reporting a 14 per cent fall in buyers in the market over the last four weeks compared to a year ago.
According to Moneyfacts, the average rate for a five year fixed term mortgage now sits at 5.83 per cent, up from 5.17 per cent since the start of June.
“Our view remains that five per cent mortgage rates represent a tipping point, beyond which house prices will post annual price falls with lower sales volumes,” Zoopla said in the report.
“The sales momentum over [the first half of 2023] is not going to be maintained into [the second half].”
Before summer, the housing market was showing slow signs of recovery after confidence plummeted following September’s mini budget.
Mortgage approvals were on the up in March, rising “significantly” to 52,000 from 44,100 in February. It is unclear what the figure may look like ahead of central banks money and credit report set to be issued this Thursday.
“The resilience of the housing market and homebuyers is set to be tested once again as mortgage rates increase over five per cent,” Richard Donnell, executive director at Zoopla, said.
“Mortgage rates falling to four per cent earlier this year supported a rebound in sales and led to house prices registering small month-on-month gains.”
In London, annual house prices have fallen by 0.2 per cent, Zoopla said, against a 1.2 per cent drop nationally.
“The main risk to house price growth, aside from a weakening economy, is a sudden surge in the supply of homes for sale. There are some signs that supply is starting to grow at an above-average rate with 18 per cent more homes listed for sale in the last four weeks vs the five-year average,” Donnell added.