As interest rates rise, sellers reduce house prices to attract buyers

As mortgage costs increased, the pressure on the housing market caused a further decline in house prices and inquiries.

According to a Royal Institution of Chartered Surveyors survey, professionals reported that the number of new buyer enquiries had dropped by eight months last month. A net 45 percent of professionals in the property industry reported that buyer inquiries were falling, not increasing. This is a significant change from a 20 percent balance recorded in May.

Agents also reported that as lending conditions tightened, sellers cut prices. According to the surveyors body, 46 percent of professionals reported that house prices were falling, not increasing. This is a decline from 30 percent in May.

The energy crisis has affected buying habits, and property prices are better for well-insulated homes. According to the institution, 58 percent of respondents in its survey reported that energy efficient homes held their value even during the economic downturn.

Simon Rubinsohn said, “The latest rise in interest rates, and its impact on mortgage rates, is clearly visible from the key metrics of buyer inquiries, sales, and prices which have all declined over the last month. In this environment, it is inevitable that activity levels will remain low. “It is important to remember that the house prices have only modestly dropped from their recent highs, and they are still well above the levels prior to the outbreak of the pandemic.”

Since the Bank of England began raising interest rates, more than 4 million homeowners have already been affected. Mortgage brokers warn that banks are having difficulty dealing with the influx of loan applications from borrowers who want to lock-in rates before they become more expensive. The cost of a typical two-year fixed rate mortgage has risen above the levels seen after the mini-budget last autumn.

Hamptons, an estate agency, released statistics recently showing that sellers now take an average 52 days to receive an offer, as opposed to 33 days a year earlier. These figures show that the market has slowed down to its lowest level since Hamptons began recording transaction times in July 2014.

Zoopla, a property portal, reported that the slowdown forced one out of six sellers in May to accept a 10% discount on their original asking price, and four out of ten sellers accepted discounts as low as 5%.

James Watts of Robert Watts Estate Agency said that the impact of the recent rise in interest rates is still to be felt but the market is becoming more cautious and the number suitable buyers is down. We expect the sale price to fall in the next 6 months, especially for the high end of the market.

Colin Townsend of John Goodwin, an estate agent and surveyor, stated that “it feels like the tide is changing.” Vendors are facing a much greater challenge. Negotiating for properties is taking longer and the prices have fallen.”

Mark Wood. Mark Wood, head of land acquisitions for Blues Property in Cambridge, said that while quality city homes are still generating interest, and their values are holding, the market as a whole has slowed. We are now seeing more price reductions, and the top end is extremely slow.