Three in five homes listed for sale since January remain on the market due to high mortgage rates and reduced buyer demand, according to property portal Zoopla. While agreed sales dropped 7% year-on-year, falling mortgage rates and increased competition among lenders are beginning to shift market conditions for potential buyers.
Why are so many homes remaining unsold?
A combination of low buyer demand and high asking prices from sellers has left a significant portion of the UK housing stock sitting idle. Zoopla reports that 60% of homes listed since the start of the year have not yet found buyers.
The impact is not uniform across the country. Agreed sales have fallen by 7% compared to the previous year, but certain regions are seeing much sharper declines. For instance, sales dropped by 12% in Wales and 11% in the East Midlands, according to Zoopla’s data.
This stagnation is largely tied to the cost of borrowing. Zoopla’s report, which tracks the market through the end of May, indicates that buyer demand in the UK fell by 15% compared to the same period last year.
How did geopolitical tension affect mortgage rates?
Mortgage costs saw a significant spike in April, driven by financial upheaval stemming from the US-Israeli war with Iran. This volatility added an average of £125 per month to a typical mortgage at its peak compared to the costs seen in January.
Financial information service Moneyfacts provided specific data on these fluctuations. The average two-year fixed rate rose from 4.83% at the start of March to a peak of 5.90% on 12 April. Since that peak, the rate has dropped to 5.54%.
This sudden increase in borrowing costs hit first-time buyers the hardest, as they are often the most sensitive to monthly repayment changes.
How do mortgage costs vary by region?
The financial burden of higher interest rates depends heavily on where a buyer is looking to move. While the national average monthly increase for a typical mortgage was £125, the experience in London was much more expensive.
In London, the peak mortgage rate increase added an average of £232 a month to the costs faced by first-time buyers. In contrast, buyers in the North East of England saw much lower impact, with mortgage costs for first-time buyers rising by only £66 a month over the same period.
What is the outlook for buyers and sellers?
Despite the recent difficulties, the market shows signs of stabilizing. Lenders are beginning to compete more aggressively, which is driving rates downward.
Richard Donnell of Zoopla suggests that the current environment may actually be more favorable for those ready to move than the market was just three months ago. He noted that rates are falling, there is more choice in available homes than there was a year ago, and motivated sellers are increasingly willing to negotiate.
For buyers, the combination of more inventory and lower rates than the April peak suggests a window of opportunity is opening, provided they can find properties within their budget.
Frequently Asked Questions
Why are UK house sales declining?
Sales have declined due to high mortgage rates reducing buyer demand and some sellers maintaining high asking prices despite the economic climate.
What was the peak two-year fixed mortgage rate in 2024?
According to Moneyfacts, the average two-year fixed rate peaked at 5.90% on 12 April.
How much more did London first-time buyers pay in mortgage costs?
During the April peak, London first-time buyers saw an average monthly cost increase of £232, compared to a national average of £125.
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