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Home sellers reduce asking prices at highest rate since pre-pandemic as rising rates hit buyers

Is it now a buyer’s market? House sellers reduce asking prices at highest rate since pre-pandemic as surging mortgage costs hit home

  • Zoopla: 6% of homes listed for sale have had asking price reduced by 5% or more
  • This is the highest level since pre-pandemic, according to the property site
  • Rising mortgage rates ‘will erode much of the gains’ from stamp duty changes
  • Average asking prices rose 8.2% in year to August to £258,100

The housing market is becoming a buyer’s market as surging mortgage rates are beginning to reduce buying power and demand, according to a new report.

Sellers are increasingly having to lower their asking prices, with reductions at the highest levels since before the pandemic, property website Zoopla said. 

Six per cent of homes currently listed for sale have had their asking price reduced by 5 per cent or more, its research found.  

Although the recent cuts to stamp duty will make it easier to get on the housing ladder for some first-time buyers, Zoopla said rising mortgage rates will impact demand for homes next year. 

Price cuts: Asking price reductions are at the highest levels since before the pandemic

‘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,’ said Zoopla’s executive director, Richard Donnell. 

‘Stamp duty changes are welcome and will boost some sectors of the market but, overall, they are unlikely to offset the impact of higher mortgage rates on housing activity,’ he added.

The cost of a mortgage has increased significantly following successive rises in the Bank of England’s base rate, with average interest rates on five-year fixed mortgages hitting a seven-year high according to Moneyfacts. 

Five-year fixed term rates jumped from 2.64 per cent in December 2021 to 4.33 per cent last week – and that was before the effect of the mini-Budget and the falling pound was factored in. 

A wave of major lenders pulled mortgage deals from sale this week as the financial markets are rocked by the volatile pound and expectations that the Bank of England may go for a more aggressive rate hike. 

The impact of higher mortgage rates on market activity is compounded by sizeable increases in house prices over the pandemic.

“Stamp duty changes are welcome and will boost some sectors of the market but, overall, they are unlikely to offset the impact of higher mortgage rates on housing activity 

Richard Donnell, Zoopla 

Average asking prices surged another 8.2 per cent, or £19,650, to £258,100 over the year to August, although the quarterly rate of growth is slowing, Zoopla said.

While it saw no immediate signs of a major slowdown, it the property portal said it had noted a ‘clear upward trend’ in the proportion of homes for sale which had their asking prices reduced by 5 per cent or more over spring and summer.

Currently, around 6 per cent of homes listed on its website have had their asking price adjusted downwards – the highest percentage since before the pandemic, Zoopla said.

While re-pricing is a common seasonal trend in autumn, Zoopla added that given the current economic backdrop, ‘we see this as a move to more of a buyer’s market after two years of a red-hot sellers’ market’.

And added: ‘Looking ahead, higher mortgage rates will have the greatest impact on activity in higher value markets and areas which have registered the greatest surge in prices over the pandemic.’

Buyers in regional markets and first-time buyers in London and southern regions, where homes are more expensive, will benefit from the increase in the stamp duty thresholds announced last week.

But the increase in mortgage rates ‘will erode much of the gains’ from stamp duty changes, according to Donnell.

Director of Benham and Reeves, Marc von Grundherr, said: ‘The market is now at a bit of a tipping point where house prices have continued to increase rapidly, but the reality for many buyers is that they are no longer able to stretch themselves financially.’

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