Mortgage rate hikes cost London homebuyers £35,000
The surging mortgage rates caused by the Iran war have forced the average London homebuyer to fork out an extra £35,500 for their deposit.
The rising cost of borrowing caused by the Middle East conflict has meant that the average deposit in the UK is £18,400 higher than in January – though costs have risen much more for Londoners, according to homes portal Zoopla.
The country’s mortgage market has been flipped upside down since the Iran war broke out, with lenders hiking average rates as high as 5.54 per cent in the immediate aftermath of the US and Israel’s first strikes on Iran.
Though this initial rush has cooled slightly, the average five-year mortgage rate has still risen from below four per cent in January to about 4.8 per cent today.
These surging rates have had a knock-on effect on the deposits that must be paid by prospective homeowners.
But soaring deposits in London have revealed the huge burden facing homebuyers in the capital. The extra £35,000 in deposit costs facing London buyers is more than three times the additional £10,200 needed by those in the North East.
The burden of these bigger mortgages is worse for first-time buyers, Zoopla has found, because they often take longer mortgage terms and larger loans compared to existing homeowners.
In recent weeks, the UK’s struggling housebuilders have been urging the government to intervene to break down the barriers blocking prospective first-time buyers from homeownership.
Unlocking demand among first-time buyers is central to easing the significant financial pressure which has faced housebuilders since the Iran war broke out, they say.
Housebuilders Bellway and Barratt Redrow – along with property portal Rightmove – are among those urging Andy Burnham to slash stamp duty for first-time buyers.
Autumn boost on horizon
Property experts at Zoopla said: “In the face of reduced buying power, home buyers can choose to: wait for rates to move lower, look to buy cheaper homes, accept paying more on their mortgage repayments or put down a larger deposit to reduce the impact.
“There is no evidence of buyers scaling back on requirements and many have decided to wait over the summer with fewer sales agreed compared to last year.”
But Zoopla has suggested that there are “clear signs” that an autumn boost is coming to the UK’s housing market.
The number of people using the platform to search for homes is seven per cent higher than this time last year, though the number of sales agreed remains six per cent lower.
Tom Bill, head of residential research at property advisory firm Knight Frank, said: “The autumn bounce in housing market activity should be more noticeable than it was in the spring, but that’s not a particularly high bar.
“The Budget rumour mill is quieter than last summer, which has encouraged people to act. If tax speculation increases from September, that could sap momentum from the market.”