The housing market is becoming a buyers’ market

The housing market is becoming a buyers’ market

8:01 AM, 29th September 2022, About 2 years ago 3

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The UK’s housing market is slowly transitioning into a buyers’ market as higher mortgage rates hit household buying power by up to 28% – and asking price reductions return to pre-pandemic levels.

That’s the verdict of Zoopla’s August House Price Index and they also highlight that stamp duty changes will support lower value markets and help first-time buyers in southern England.

The platform highlights that the increase in the stamp duty threshold to £250,000 takes 43% of homes out of stamp duty obligations.

Their index also reveals that UK house price growth remains stable at +8.2% year-on-year despite increasing cost of living pressures with the pandemic price gains compounding the issue of affordability – especially in southern England.

And some regions including Wales, the North East and Scotland have seen 10 years of growth compressed into just two years over the pandemic.

Recent spike in mortgage rates for new borrowers

Despite housing market activity holding up over the summer, the recent spike in mortgage rates for new borrowers is the most important factor for the housing market this autumn.

That’s because higher mortgage rates are reducing buying power which could be as much as 28% if mortgage rates reach 5% by the end of the year – assuming buyers want to keep their monthly repayments unchanged.

To offset the hit to buying power, Zoopla says that buyers have three options:

  • They can put down a larger deposit
  • Allocate more of their income to mortgage costs
  • Adjust their budgets and consider buying a smaller property or purchasing in a cheaper area.

They add that higher mortgage rates will have the greatest impact on buying power in high-value markets in London and the South East – as well as regions such as Wales that have registered the greatest surge in house prices over the pandemic.

Price sensitivity is emerging

There are also early signs that price sensitivity is emerging as 6% of homes listed for sale have seen the asking price being adjusted downwards by 5% or more, the highest level since before the pandemic.

Re-pricing is a seasonal trend as autumn approaches but given the economic backdrop and factors including rising energy prices and rising interest rates, Zoopla says this is a clear sign of a return to a buyers’ market after two years of a red-hot sellers’ market.

For sellers, this means there is more of an impetus to change their mindset when it comes to asking price and consider local market dynamics more closely as well as the potential types of buyer for their property in the local area.

However, these price adjustments are to be expected as the market shifts from conditions where demand greatly exceeds supply.

Zoopla says it does not believe that this is a precursor for big price falls but an indication that the rate of price growth will start to slow more rapidly later this year and into 2023 as buyers react to the rising cost of borrowing.

‘Measures of housing market activity have been very resilient’

Richard Donnell, the executive director at Zoopla, said: “Measures of housing market activity have been very resilient over the summer.

“A surge in home values over the pandemic and the rise of mortgage rates means we face a sizable hit to household buying power over the rest of 2022 and into 2023.”

He added: “While the recent changes to stamp duty are welcome, supporting activity in regional markets and the first-time buyer market in southern England, the increase in mortgage rates will erode much of the gains.

“Homeowners that want to sell their home this year need to price realistically and seek the advice of an agent on local market trends.”

‘Fixed rates will have risen significantly’

In response to rising mortgage rates impacting household buying power by 28% if rates reach 5% by the end of the year, Sarah Coles, the senior personal finance analyst at Hargreaves Lansdown, said: “When the dust settles on the chaos in the mortgage market, the ground will have shifted, and fixed rates will have risen significantly.

“The impact on buying power will mean some incredibly difficult decisions for homebuyers, who could end up with smaller ambitions or horribly tight budgets. This is going to take a toll on the market.”

She added: “For some, this will push the home they want out of reach.

“A combination of rapidly rising prices, higher mortgage rates and a wider squeeze on their finances, will mean they just can’t stretch to higher mortgage payments.

“Even if they’re prepared to push their budget to the limit, their mortgage lender may have other ideas. Factoring all this into mortgage affordability calculations may mean they can’t find anyone prepared to lend to them.”

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wyn kyaw

19:36 PM, 29th September 2022, About 2 years ago

Very much doubt about be buyer market soon. Interest rates are rising (BOE base rate may hit 6% at the mid-next year 2023, so that borrowing cost may end up at 7-8%), affordability for first-time buyers is down, ending of first-time buyer program, raising the unemployment rate. Many businesses are with unmanageable debt. The recession is just around the corner.


20:02 PM, 1st October 2022, About 2 years ago

With mortgages being pulled ( as generally published ) and issues with liquidity in the market place I would say the tables are turning. Any estate agent or seller in this climate turning down offers, would be rather foolish. However, to be in the best position you need to be buying cash or have a funding source at a given fixed rate available to you. I think I will wait until Jan/Feb and have a sniff around.


10:36 AM, 5th October 2022, About 2 years ago

we"re doomed is an oft thought feeling lol, I can remember when our mortgage hit 13 per cent, they called it black monday, could we afford the rise no lol The thing is nor could millions of others, and we were helped by been allowed to under pay our interest only mortgage for a couple of years, of course it was added to our mortgage. We were still are working class folks and have witnessed a bit , its aint the ups and downs its the jerks in the middle, we have to contend with, brokers, banks tend to hide one cowardly excuse after the other, when its tough, and when its great they wine and dine ya lol. Looking at friends in 87 those without kids could afford the extra, those with a high FEAR emotion sold, oft, at less than they paid, folks like me did whatever it took to hang in there, at the mo my out of fixed rate properties are around 4 per cent, climbing to? still a lot less than 87 :} so may or may not not sell some, the other are on fixed for another few years shall we go or shall we stay, we will stay I will not have fear defeats me, nor the jerks who are abundant and work in parliament the civil service and we pay their wages :} its a long term journey, call it all joy, RESPECTS for whatever you folks do, we are all emotionally different. and eck incorporate, now lol borrow the money if ya have too, and listen to those in the know, not experts, who dont even have a track record in property, just good sound bites, and no we aint doomed👌👏😊 XXX

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