Buyer demand softened over the last fortnight, a closely-watched survey of the UK housing market showed on Monday, as the spike in mortgage rates weighed heavily.
According to the latest Rightmove House Price Index, buyer demand remains 20% higher than 2019, but fell 15% year-on-year over the last two weeks. Demand from first-time buyers was down 21% in the same fortnight.
The property portal attributed the weakening to recent “rapid” mortgage rate rises, which had caused potential buyers to pause their plans.
House prices continued to grow, rising 0.9% to a fresh high of £371,158, although that was below the five-year average rise for October of 1.2%. The number of homes seeing a reduction in asking price during the month rose to 3% from 2%.
Tim Bannister, director of property science at Rightmove, said: “What’s going to happen to house prices is understandably on the minds of many home-movers right now, especially following the market uncertainty after the government’s mini-budget.
“There has been no immediate effect on prices, but the trend of a slight softening in the pace of growth continues.
“Some aspiring first-time buyers will have had their plans dashed by the sudden nature of the mortgage rate rise, and now face a difficult situation with rents also rising and a shortage of available homes to rent.
“Buyer demand was already starting to soften and higher interest rates were anticipated, but they’ve been brought forward sharply due to market uncertainties.”
Interest rates have been steadily rising since the end of 2022, as the Bank of England looks to tackle surging inflation, currently at a near-40 year high of 9.9%. The cost of borrowing is now 2.25% and is expected to rise again when the Monetary Policy Committee next meets in early November.
However, September’s mini-budget led to sharply higher volatility, after the government announced £45bn of unfunded tax cuts but no spending plans or economic forecasts, deeply unsettling already under-pressure markets.
Many analysts now believe November’s pencilled in rise will be larger than expected, and that rates are on course to peak at 6% next year, significantly affecting buyer affordability.
Rightmove said agents surveyed had reported buyers rushing to complete before lower fixed-rate mortgage offers expire.
Rightmove assessed 100,046 asking prices in October, around 95% of the national market. Properties were put up for sale between 11 September and 8 October.