According to Halifax, house prices are experiencing a slight downturn but are rising in certain areas. However, experts warn that this decline could be long-lasting and have a detrimental effect on borrowers and homeowners. Rather than a sudden shock, the damage to the market will be gradual and spread out over many years. Estate agents are reporting that sellers are being forced to lower their asking prices, borrowers are taking more time before making commitments, and overall sentiment among estate agents is the most negative it has been in 14 years. While flats are particularly affected, some property types are proving more resilient.
The current state of the property market is fragile, and there are several factors causing these tremors. The rising cost of borrowing is starting to impact house prices. Mortgage rates have reached a 15-year high, and the average two-year fixed-rate deal rose to 6.75%, resulting in potential monthly repayment increases for borrowers. This means that homeowners may need to downsize if they can no longer afford their monthly payments, and sellers are being forced to accept offers below their expectations. Estate agents are noticing more sales being agreed below the asking price compared to last year.
Some sellers are overpricing their homes in the current market, which is leading to a higher number of properties being listed with price reductions. Estate agents advise sellers to price their homes realistically from the beginning to increase their chances of finding a buyer. The Bank of England’s promise of gradual and limited interest rate rises has not materialized, as rates have instead risen suddenly and significantly. Many buyers are now more price-sensitive and have more power to negotiate for better deals.
As a result, sellers are experiencing longer waiting times to receive their first offer after listing their homes. Waiting times have increased across all regions, with Wales seeing the largest rise. House prices have started to decline slowly, with prices falling by 1.1% in May and 2.6% in June compared to the previous year. Flats have been the most affected, with a 3.1% average price decrease, followed by terrace homes at 2.5%. However, new builds have proven to be more resilient, with a 1.9% price increase.
Buy-to-let landlords are also feeling the impact of higher mortgage rates, with some being forced to sell their properties or pass on the increased costs to renters. Overall, the current state of the property market is uncertain, and both buyers and sellers need to adjust their expectations and strategies to navigate these challenging conditions.
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