Value of London homes sinks as red hot mortgage rates continue to rattle market
Some 68 per cent of west London homeowners have seen the value of their property decrease since last November, new data shows, as soaring mortgage rates and a difficult buyer market rattle the capital’s housing sector.
As buyer confidence falls due to red hot mortgage rates 7,000 homes across west central London decreased in value over the past six months, according to figures from estate agent Zoopla.
Over the last six months, 11.1m (38 per cent) homes have recorded a decline in value, averaging £7,700 per property, reflecting the fall out from September’s mini budget and subsequent rate rises.
The London housing market is worth £2.5 trn – equivalent to the Midlands,Scotland, Wales and Northern Ireland combined, however statistics released by Zoopla last week showed that 42 per cent of sellers are accepting discounts over five per cent on the asking price to secure a sale.
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 latest data from Moneyfacts show that the average five-year fixed rate mortgage is up from 5.97 per cent to 6.01 per cent, the highest since the mini budget fiasco led by former chancellor Kwasi Kwarteng.
Further figures from property lending experts, Octane Capital, show London faces the highest cost, with the average homebuyer facing a monthly mortgage repayment of £2,155 – 72 per cent higher than the national average.
“As the market continues to move rapidly, it is very likely that lenders will be continuing to make fleeting changes to keep up,” Colby Short, chief executive of Getagent said.
“Borrowers may think that opting for shorter-term deals will protect them should the rates return to normal – but no-one knows how long it could take for this to happen.”
“House prices look set to move lower in the coming months as six per cent mortgage rates deliver a 20 per cent hit to household buying power,” Richard Donnell, executive director at Zoopla, told City A.M.
“The longer-term outlook depends on how long mortgage rates remain at this level. We expect them to reduce later this year with four-to-five per cent rates being a more sustainable level and one where house prices are broadly flat.”