Three in five homes listed for sale since January are yet to find a buyer, as sales agreed fall by 7% year-on-year, the latest Zoopla figures show.
The Index reveals that buyer demand has fallen by 15% year-on-year across the UK, with the combination of political uncertainty and higher borrowing costs hitting buyers differently across the country. A jump in mortgage rates in April has added to £232 to the average first-time buyer’s costs in London, but just £66 in the North East - with this gap reflecting differences in market performance across the UK.
At the same time, buyer demand has fallen by 15% year-on-year, with more people taking a wait-and-see approach until the outlook becomes clearer.
Sales agreed have declined across the UK, but these declines are more modest in Northern regions and Scotland (decreases between 3-6%), where buyers face fewer home options for sale and can benefit from less dramatic increases in mortgage repayments than those in the South.
However, the likes of Wales (-12%), East Midlands (-11%), East of England (-10%) and South West (-10%), have seen the largest decreases in sales agreed, while London (-9%) and the West Midlands (-8%) also sitting above average. The West Midlands has also seen the steepest decrease in buyer demand, with this dropping by -30% YoY, closely followed by the North East at -29%.
Higher rates adding up to £200 more to the average mortgage
With mortgage rates hitting 5% in April, would-be buyers are facing an extra £125 monthly on top of the average mortgage - adding up to £1500 a year. However, the same rate rises are hitting buyers very differently depending on where they are buying, which explains why some markets have slowed sharply while others are holding up.
London’s first-time buyers are seeing a monthly increase of £232, which is nearly three and a half times the £66 monthly increase facing a first-time buyer in the North East.
House price inflation is still positive but starting to slow
Fewer sales is starting to feed into UK house price inflation, which has edged lower to 1.4% year-on-year. The latest data for price inflation reflects sales agreed earlier in the year, before the full impact of higher rates was felt, meaning price inflation is set to slow further into the autumn unless mortgage rates fall further and sales recover.
The North East and North West are currently the strongest performing regions in England, seeing growth of 3.5%, while those in Scotland, where there remains a scarcity of supply with fewer homes for sale than last year, are registering growth of 3%.
At the other end of the spectrum, London is facing its ninth consecutive month of negative annual house price growth, with this sitting at -0.2% in May. The South East is similarly low at -0.3%.
Richard Donnell, executive director at Zoopla, commented: “Higher mortgage rates have hit sales and squeezed affordability for home buyers alongside increased political uncertainty. The impact is less severe than what the market faced after the 2022 mini-budget, and mortgage rates have started to fall.
"It’s a buyer’s market across much of the South right now, but motivated sellers in northern England and Scotland are still finding buyers at broadly last year's pace which shows the housing market is not moving at one speed.
"For sellers still waiting for an offer, the conversation to have is about price. Correctly priced homes are selling, while overpriced homes are sitting. For buyers, rates are falling, there is more choice of homes for sale than a year ago and motivated sellers are willing to negotiate."
