UK house sales are on track for their slowest year in more than a decade, as higher mortgage rates and inflation hit the purchasing power of prospective homebuyers.
Some 1mn houses are set to be sold in England, Scotland, Wales and Northern Ireland this year, down one-fifth on 2022 and the lowest figure since 2012, according to research by property portal Zoopla.
The decline follows four consecutive months of house price falls and is the latest sign of a slowdown in the property market, as buyers contend with steeper borrowing costs sparked by successive interest rate rises by the Bank of England.
“Clearly, the impact of higher interest rates and cost of living is affecting people’s desire to move home,” said Richard Donnell, head of research at Zoopla.
The study estimated a year-on-year drop of 28 per cent in mortgage-backed sales. By contrast, cash purchases were forecast to fall by 1 per cent compared with 2022, accounting for one in three sales.
Donnell said transaction volumes were “feeling the pinch, and it’s no surprise it’s the mortgage market where the biggest squeeze is being felt”.
The average 2-year fixed residential mortgage rate stands at 6.7 per cent, according to data provider Moneyfacts, near a 15-year high and well above the 3.95 per cent average in early August 2022.
Donnell said the resilience of cash transactions had been fuelled in part by house purchases by retirees, who had paid off mortgages and were seeking to downsize and free up cash in the face of higher living costs.
In a sign of relative resilience, UK house prices rose at an annual rate of 0.1 per cent in July, the slowest pace since 2012, according to Zoopla’s own index.
“We haven’t had the price fall we need to make housing more affordable and encourage more [house sales],” said Donnell. “We are stuck and the prices are not falling as much.”
House prices as measured by the property portal are not, however, moving uniformly across the country. While they rose by 1.7 per cent in Scotland in July, they fell 1 per cent in London over the same period.
The report attributed the weaker demand in southern England to prospective buyers being priced out of the market owing to the need for bigger mortgages, deposits and incomes to make a purchase.
Zoopla said it expected mortgage rates to fall below 5 per cent later this year, but that the positive effects on buyers’ ability to complete transactions would not be felt until the first half of next year.
People awaiting sharper falls in mortgage rates may have “unrealistic” expectations, Donnell said, adding: “It could take a while for consumers to wake up to realise 4-5 per cent is going to be the new normal, not 2-3 per cent.”