The growth of house prices experienced a further slowdown in June due to the impact of soaring mortgage rates. This has affected buyers’ purchasing power, leading to sellers accepting larger discounts on their homes. A recent report from Zoopla’s house price index revealed that over two-fifths of sellers (42%) are now accepting offers that are more than 5% below the asking price, a significant increase from the 14% who did so in June of the previous year. This is the highest proportion observed since 2018.
The average UK home saw a price increase of 1.2% in the year to June, down from the 1.9% growth observed in May. Approximately 15% of sellers are even accepting discounts of more than 10% below the asking price. Overall, the average discount to asking price has risen to 3.8%. Zoopla predicts further depreciation in house prices during the second half of the year as mortgage rates rise again, reaching 6% in the past week.
According to Zoopla, mortgage rates above 5% represent a crucial turning point beyond which house prices will decline on an annual basis, and the number of agreed sales will decrease. The firm stated that while mortgage rates of 4-5% are manageable, extended periods of rates above 5%, and approaching 6%, will lead to reduced purchasing power which will result in lower sales and prices. It expects house prices to drop by up to 5% this year, with the most significant falls concentrated in Southern England.
Richard Donnell, executive director at Zoopla, commented on the situation, stating that falling mortgage rates in the first half of the year had supported sales and led to firmer prices. However, he expects this trend to reverse in the second half as higher mortgage rates impact buying power, forcing sellers to accept larger discounts.
Zoopla notes that the effects of higher borrowing costs will take time to materialize fully, with lower sales down by 20% compared to the previous year being the initial impact. However, there are significant regional differences in market conditions. While Scotland, the North East, and London have seen more stable market activity and stagnant prices, southern England and the Midlands, where house prices experienced the most significant growth during the pandemic, have seen weaker market activity due to buyers being more sensitive to higher borrowing costs.
In terms of regional trends, house prices have dropped in Aberdeen, Belfast, Cambridge, and London. However, other major UK cities have experienced price increases, although at a much slower pace compared to the previous year. Nottingham and Birmingham exhibited the most significant annual growth, with 2.9% and 2.7% respectively.
Recent data from Zoopla indicates a sudden surge in the supply of homes for sale, which could contribute to further downward pressure on prices in the following months. This increase in supply, coupled with a drop in demand, presents a risk for prices. It is likely that an increase in supply will give buyers more options and negotiating power, leading to larger house price declines.
Given the current situation, borrowers whose fixed-rate mortgage deals are ending should explore their options as soon as possible, as they may face higher costs. Those who have agreed to purchase a home should also assess their borrowing capacity and monthly payments and consider locking in a deal. Mortgage brokers can assist buyers in finding the best rates and deals suitable for their circumstances.
It is important to note that interest rates can change rapidly, so borrowers should compare rates well in advance and consult with a broker promptly to secure the most favorable mortgage terms. By doing so, borrowers can avoid costly arrangement fees and potentially take advantage of lower rates if they fall before closing the mortgage deal.
Furthermore, homebuyers should be cautious of stretching themselves too thin and consider the possibility of falling house prices. Higher mortgage rates limit people’s borrowing ability and buying power, so it is essential to carefully evaluate the potential risks before committing to a purchase.
In summary, the growth of house prices has slowed down, as soaring mortgage rates impact buyers’ purchasing power and sellers are forced to accept larger discounts. Zoopla predicts further declines in house prices in the second half of the year due to rising mortgage rates. Regional variations in market conditions have been observed, with Scotland, the North East, and London experiencing more stable activity, while southern England and the Midlands face weaker market conditions. The sudden surge in home supply and decrease in demand poses a risk for prices. Borrowers whose fixed-rate mortgage deals are ending should explore their options, and homebuyers should secure rates promptly while considering the potential for falling house prices. Mortgage brokers can provide assistance throughout the process.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
