The average price of property coming to the market rises by 0.9% (+£3,398) in October hitting a new record of £371,158, according to Rightmove.
While this represents a softening from the five-year average rise in October of 1.2% there is little sign of downwards price pressure on existing properties for sale. The number of homes seeing a reduction in the month creeps up by 2% to 23%.
Rapid mortgage rate rises understandably caused some new movers to pause their plans and wait to see how the next few weeks unfold.
But buyer demand is still 20% higher than the more normal market of 2019, but it is down by 15% in the past two weeks compared with the same two weeks last year.
The first-time buyer sector appears hardest hit by interest rate increases, with demand in the past two weeks dropping by 21% compared to the same two weeks last year, though it is 24% higher than 2019.
Meanwhile, the vast majority of agreed sales are still going ahead. Only 3.1% of sales agreed have fallen through in the two weeks since the mini-Budget, which is in line with the 3.0% over the same two weeks during 2019.
Tim Bannister, Rightmove’s director of property science, said: “The rapid rise in average mortgage interest rates has understandably caused some would-be home-movers to pause their plans and wait to see how the next few weeks and months unfold.
“Overall demand is down by 15% in the last two weeks compared with the same two weeks last year, but it is still 20% higher than the more normal market of 2019. Looking at the different market sectors, it appears that first-time buyers have been the hardest hit, as higher rates may prove to be a step too far for those who were already stretching their finances.
“Demand in the first-time buyer sector is down by 21% in the last two weeks compared to the same two weeks last year, though it is still up 24% compared to the more normal market of 2019.
“But despite this hiatus affecting some would-be buyers as they wait for a steadier outlook, those who have already agreed their purchase are not losing their resolve. Only 3.1% of sales agreed have fallen through in the two weeks since the mini-budget, which is in line with the 3.0% over the same two weeks during 2019. Agents are reporting that those who managed to secure a mortgage offer at a lower rate are rushing to complete their purchase before that lower rate offer expires.
“The vast majority of buyers who had already agreed their purchase are still going ahead. Some aspiring first-time buyers will have had their plans dashed by the sudden nature of the mortgage rate rises, and now face a difficult situation with rents also rising, and a shortage of available homes to rent.
“Buyer demand was already starting to soften and higher interest rates were anticipated, but they’ve been brought forward sharply due to market uncertainties. Agents report that many of those who managed to secure a mortgage offer at a lower rate before lenders quickly increased them are now rushing through their agreed deal to avoid their offer expiring and facing a higher rate when they come to reapply. It’s understandable that some new movers who have the option to wait, may want a clearer view than they’re getting right now before they proceed with a major purchase such as a home.
“With uncertainty over where mortgage interest rates will go, those who can still afford to proceed may decide that waiting too long could come at an even higher cost than taking action to move now, especially if the level of demand continues to outstrip supply and supports prices.”
Reaction
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“The small drop in asking prices is certainly not unexpected given the reduction in new buyers, particularly over the past few weeks after the mini-Budget frightened the life out of many.
“Bearing in mind these are asking not selling prices, we might have anticipated a sharper correction but reflects what we’re seeing on the ground.
“More realistic buyers and sellers are negotiating hard – often to utilise existing mortgage offers on more advantageous terms before rates rise even higher.”
Tomer Aboody, director of property lender MT Finance:
“As we head towards the end of the year and the desire to complete on a property purchase or sale intensifies, sellers are reducing prices in order to get transactions through. Rising costs and interest rates are having an impact but largely buyers and sellers remain resilient.
“With the expected higher mortgage rates already resulting in buyers and sellers feeling the pinch, many of the new properties coming to market are priced to reflect this – slightly reduced to allow for extra payments as well as building in any market reduction over the forthcoming 12 months or so.
“Thankfully, the interest rate pain could have been a lot worse but the markets are now factoring in a lower maximum predicted rate as they respond well to Rishi Sunak becoming Prime Minister.”
Stephen McCarron, NAEA Propertymark President:
“The portals latest data reiterates what our member agents are seeing on the ground. We know that buyer demand remains strong but given the cost of living on the rise and interest rates increasing buyers are becoming more cautious with their budgets.
“However, alongside the financial strains in today’s current economic climate, this slowing in house prices was due to occur naturally given the huge spike seen in recent months, as prices achieved were unsustainable and unrealistic for many buyers in the market.”
Simon McCulloch, chief commercial & growth officer at Smoove:
“The latest figures from Rightmove are not surprising considering the tumultuous period we have experienced recently. As Rightmove confirms though, the 1.1% dip is in line with previous records for this time of year and during the pre-pandemic years. However, higher mortgage rates have led to a fall in new buyer enquiries, driving down current demand. Meanwhile, the cost-of-living crisis continues to tighten budgets and provoke caution among buyers.
“Nevertheless, with the Bank of England recently indicating that we may be approaching the peak of its base rate hikes, there is potential for a slight easing of borrowing costs in the coming months. Under the new management of Prime Minister Rishi Sunak and Chancellor Jeremy Hunt, we can also expect greater economic stability going forward. A complete recovery will require time, but sound economic management, in combination with strong underlying demand for housing should see a more robust market come back in 2023.”
