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

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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 on the market have had asking price reduced by 5% or more
  • That is the very best level since pre-pandemic, in accordance with the property site
  • Rising mortgage rates ‘will erode much of the gains’ from stamp duty changes
  • Average asking prices rose 8.2% in yr to August to £258,100

The housing market is becoming a buyer’s market as surging mortgage rates are starting to scale back buying power and demand, in accordance with a latest report.

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

Six per cent of homes currently listed on the market 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 yr. 

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

‘A surge in home values over the pandemic and the rise of mortgage rates means we face a large hit to household buying power over the remainder of 2022 and into 2023,’ said Zoopla’s executive director, Richard Donnell. 

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

The price of a mortgage has increased significantly following successive rises within the Bank of England’s base rate, with average rates of interest on five-year fixed mortgages hitting a seven-year high in accordance with 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 because 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 upper mortgage rates on market activity is compounded by sizeable increases in house prices over the pandemic.

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

Richard Donnell, Zoopla 

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

While it saw no immediate signs of a serious slowdown, it the property portal said it had noted a ‘clear upward trend’ within the proportion of homes on the market 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 very best percentage since before the pandemic, Zoopla said.

While re-pricing is a typical seasonal trend in autumn, Zoopla added that given the present 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 may have the best impact on activity in higher value markets and areas which have registered the best surge in prices over the pandemic.’

Buyers in regional markets and first-time buyers in London and southern regions, where homes are costlier, will profit from the rise within the stamp duty thresholds announced last week.

But the rise in mortgage rates ‘will erode much of the gains’ from stamp duty changes, in accordance with Donnell.

Director of Benham and Reeves, Marc von Grundherr, said: ‘The market is now at a little bit of a tipping point where house prices have continued to extend rapidly, but the fact for a lot of buyers is that they aren’t any longer capable of stretch themselves financially.’

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