House prices: Buyers playing ‘wait and see’ on purchases rattles confidence
Property portal On The Market has warned of a challenging outlook for the year ahead as aggressive rate rises have led buyers to “wait and see” on house purchases whilst the market remains unsettled.
The estate agent, which operates similar to Rightmove and Zoopla, told investors this morning that stubborn inflation and the high cost of living are contributing to a slowdown in housing market activity through the second leg of the year, which may impact trading for the group.
Last month, the Bank of England hiked interest rates by 0.5 per cent to cool inflation, however the move sent high street lenders to increase the costs of their mortgage deals, making it difficult for homeowners to afford.
“The volatility in the mortgage markets in particular is having a negative effect on transaction numbers,” On The Market said.
While the housing market was showing signs of recovery in early spring, following the fall out of Septembers mini budget, the latest rate hikes has stalled these improvements.
This means that over the last year, house prices have fallen 2.6 per cent overall.
High energy bills and mortgage costs have also impacted renters, with many landlords deciding to sell up as they can no longer afford to pay.
On The Market also warned that the lettings market is seeing a “continuing but levelling” decline in new rental instructions, pushing up average rents.
“Competition is fierce for lettings properties, but fewer new tenancies also negatively impacts agents, with a significant proportion of their monthly income resulting from new lets and the management of their clients’ portfolios,” it explained.
It comes despite the group recording a profit for the year with revenues up 14 per cent to £34.4m and adjusted EBITA up 38 per cent to £8m.
“After a strong 2022, the UK residential property market is in a state of flux. A generation of property owners are coming to terms with higher interest rates, mortgage affordability, record energy prices and high inflation,” chief Jason Tebb, said.
“Consumer sentiment will continue to be a key factor in the second half of the year, as will the behaviour of estate agents and housebuilders which may ultimately affect their decisions on supplier spend levels.”
Figures from financial information website, Moneyfacts, highlighted further pain for the housing market, revealing today that the average two-year fixed residential mortgage rate is 6.63 per cent. This is up from an average rate of 6.54 per cent on the previous working day.
The figure is very close to its October 2022 peak, when it hit 6.65 per cent following the fall out of September’s mini budget.
Rachel Springall, finance expert at Moneyfacts said: “Lenders made various rate rises across the mortgage market last week, but there were also deals withdrawn. Average fixed mortgage rates have not been as high as they are since the aftermath of the fiscal announcement.
“The outlook for mortgage rates appears to be leaning to more rate rises, particularly as swap rates remain volatile.
“Rising rates may well worry borrowers who are coming off fixed rate deal, such as those who locked into a rate below three per cent two years ago. It is still vital for borrowers to seek advice on what moves to make, but if they have some time left on their low rate fixed mortgage, it’s wise to consider increasing their repayments to reduce the term of their deal.”