Rising mortgage costs squeeze house prices – Rightmove

Home sellers in four of Great Britain’s five lowest house price areas have lowered their asking prices this month as higher mortgage costs put pressure on buyers’ budgets, Rightmove says.

London recorded the biggest increase, despite fewer than half of homes there successfully finding a buyer.

Rightmove’s data for October shows that the average newly listed asking price rose by £3,575 to £371,015, up 1% on the month but down 0.1% from last year.

It also says that average two-year fixed rates are now 5.55%, up from 4.25% when the Iran war began in February, adding around £250 to a new mortgage’s monthly payment.

Mortgage rates hit affordability

The platform’s property expert, Colleen Babcock, said: “The rapid rise in mortgage rates is really beginning to hit buyers’ budgets.

“We’re now seeing mortgage rate rises feed through to seller pricing in many of the cheaper parts of Great Britain, where prices had been more resilient this year.”

She added: “It’s an early sign that higher mortgage costs are putting pressure on affordability even in markets with lower property prices, affecting the areas and types of property that buyers can afford.

“This is a stark reminder of how price-sensitive the market is, and the message from agents, backed up by our data, remains the same – that competitive pricing from day one of marketing is critical to capitalise on initial buyer interest.”

Regional asking prices fall

In the North East, asking prices fell 2%, while Scotland saw a 1.9% decline and prices also dropped in the North West and Wales.

Yorkshire and the Humber was the exception among the five cheapest areas, recording a small rise.

London’s asking prices rose by 2.5%, recovering some of the 6% drop in July and August.

The capital remains the weakest region annually, with prices down 1.7% and homes took an average of 78 days to find a buyer.

Sales fall before Budget

The number of sales agreed was 8% below the same period last year, broadly matching the decline recorded over the year to date.

Buyer enquiries to agents were also lower, while the number of homes available for sale was at its highest for this time of year since 2014.

New listings were 3% higher than a year earlier.

Ahead of the Budget, Rightmove says some first-time buyers may be waiting for details of the Your First Home scheme for new build properties, while other households consider what announcements could mean for their finances.

Property sector reacts to Rightmove house price news

Marc von Grundherr, a director of Benham and Reeves, said: “Of course, stronger asking prices don’t necessarily translate into stronger achieved prices, and sellers will still need to be realistic if they want to secure a buyer in what remains a relatively price-sensitive market.”

Jeremy Leaf, a north London estate agent and a former RICS residential chairman, said: “It’s been clear in our offices for several months now that the double whammy of expected mortgage rate rises and shocks in the Budget is compromising confidence and activity.

“In such a sensitive market we are finding only sellers who recognise the importance of competitive asking prices are standing out from the crowd and succeeding in finding a buyer.”

Tomer Aboody, a founding director of specialist lender MT Finance, said: “Higher mortgage rates, a pending Budget and the prospect of further taxes – this time on the banks – is creating further uncertainty, lower sales and keeping a lid on values.”

Nathan Emerson, the chief executive of Propertymark, said: “While house price growth has been changeable throughout the year, underlying demand remains, with many consumers waiting for the most opportune moment to consider making a move.

“Looking ahead, much will likely depend on how inflation, interest rates and mortgage affordability evolve over the coming months and into the new year.”