Demand for new homes has fallen 15 per cent in the past two weeks, according to Rightmove, in the wake of the micro-budget that has rocked the UK economy.
The real estate portal said that while buyer demand is still 20 percent higher than it was in the same period in 2019, it is down 15 percent compared to the same two weeks in 2021.
Despite this, home sellers continued to push asking prices higher during the month to a new record high of £371,158.
Demand drops: The number of buyers seeking a new home fell 15% in October, according to real estate website Rightmove.
Price drop: Homes for first-time buyers and “second walkers” have seen their asking prices drop slightly, according to Rightmove
Looking at typical asking prices, Rightmove said the average house price in the UK rose 0.9 per cent, or £3,998, last month. This was below the five-year average for October of 1.2 percent.
On a yearly basis, prices rose 7.8 percent, down from 8.7 percent in September.
First time buyers appear to be the hardest hit by the economic turmoil sparked by the government’s announcement, which has sent mortgage rates soaring.
Among first-time buyers, home-buying demand is down 21 percent compared to 2021.
First time buyers usually have the lowest budgets of all homebuyers because they don’t have equity from an existing property to take advantage of, in addition to paying the highest mortgage rates.
“The rapid rise in average mortgage interest rates has understandably caused some potential home movers to put their plans on hold and wait to see how the next few weeks and months unfold,” the report said.
Mortgage rates have been rising steadily in recent months as the Bank of England has raised its base rate in an effort to combat rising inflation.
However, the unfunded tax cuts announced in the mini budget and the resulting market reaction led to a more pronounced rally.
This came as yields on government bonds – as British government bonds are known – jumped due to investors demanding higher rates to lend to buy Britain’s debt.
This affects mortgage pricing, combined with expectations that the Bank of England will have to raise interest rates even further, the scenario has led to mortgages being pulled and re-priced, with costs rising.
Calculating the cost: First-time buyers have seen a typical rise in mortgage payments since 2021
According to figures released by financial analysts Defaqto for This is Money, the cheapest interest rate available on a two-year £150,000 fixed mortgage for a home with a 25 per cent deposit on 18 October 2021 was 1.19 per cent.
Before the mini-budget on September 22, 2022, it had risen to 4.06 percent, but as of October 14 it was 5.69 percent.
In real terms, this would mean that the monthly mortgage payment would have risen by £363 a year.
Potential buyers and those remortgaging can see the latest rates available to them using This is Money and L&C’s Mortgage Calculator.
Despite the broader uncertainty, the majority of property sales and purchases that were agreed upon prior to the September 23 mini-budget are still going ahead, Rightmove said.
Only 3.1 percent of agreed-upon sales have fallen in the two weeks since the micro budget, in line with a figure of 3 percent over the same two weeks during 2019.
The new asking price record may seem surprising given the market uncertainty that followed the government’s mini-budget in late September, but it will take time for any impact to filter through.
Agents and mortgage brokers have reported that property buyers are rushing to complete offers before fixed-rate mortgage offers expire, which reflect lower rates in the market before September 23rd.
Rightmove said there are signs that prices are starting to fall in some areas of the country and across certain types of properties.
The median price of a ‘second move’ home – which refers to those not buying their first home or what is likely to be their last property – fell 0.2 per cent in the past month, and the typical home in the North West of England saw a decline in value by 0.6 percent.
Asking Prices: These prices rose 0.9% in October, up from 0.7% in September
“This new asking price record may seem surprising given the market uncertainty that followed the government’s mini-budget in late September, but it will take time for any effect to trickle down to house prices,” said Rightmove.
Rightmove also said there was little evidence of home sellers lowering the asking price for their properties. The number of homes that experienced a decline over the past month increased by 2 percent to 23 percent. The five-year average prior to the pandemic was 32 percent.
The real estate portal concluded that although asking prices may be lower in November and December, this is in line with normal seasonal price fluctuations. She said it was too early to predict where prices would be set in 2023.
Region by region: In demand property prices have continued to rise in some areas of the UK, while falling in others
Tim Bannister, Director of Property Science at Rightmove, said: “The vast majority of buyers who have already agreed to their purchase still move forward.
Some aspiring first time buyers will have had their plans shattered by the sudden nature of the mortgage rate hike, and now face a difficult situation with rents also rising, and a shortage of homes available to rent.
Understandably, some new movers who have the option to wait, may want a clearer view of what they’re getting now before moving forward with a purchase as large as a home.
With uncertainty about where mortgage interest rates will go, those who can still move forward may decide that waiting too long may be at a higher cost than taking action to act now, especially if the level of demand continues to outpace supply and support prices.
What to do if you need a mortgage
Borrowers who need to find a mortgage because their existing fixed-rate deal is coming to an end, or because they’ve agreed to buy a home, are urged to act but not panic..
Banks and building societies are still lending and mortgages are still being accepted with applications accepted.
However, rates change quickly, and there is no guarantee that deals will stick and won’t be replaced by mortgages that charge higher rates.
This is Money’s best mortgage rate calculator powered by L&C that can show you deals that match the value of your mortgage and property.
What if I need to re-travel?
Borrowers should compare rates, talk to a mortgage broker, and be prepared to work to secure a rate.
Anyone with a fixed-rate deal that expires within the next six to nine months should consider how much a remortgage will cost now — and consider a new deal.
Most mortgage deals allow a fee to be added to the loan and then only charged when you take it out. By doing this, borrowers can secure a rate without paying expensive arrangement fees.
What if I’m buying a house?
Those who have agreed to buy homes should also aim to lock in prices as early as possible, so they know exactly what their monthly payments will be.
Homebuyers should beware of overexerting themselves and be prepared for the possibility of home prices falling from their current high levels, due to high mortgage rates limiting people’s ability to borrow.
How to compare mortgage costs
The best way to compare mortgage costs and find the right deal for you is to talk to a good broker.
You can use our best mortgage rates calculator to show matching deals for your home value, mortgage size, term needs and flat rates.
Be aware that rates can change quickly, so the advice is that if you need a mortgage to compare rates then speak to a broker as soon as possible, so they can help you find the right mortgage for you.
> Check out the best fixed rate mortgages you can apply for
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