UK House Prices Under Downward Pressure

The UK housing market is facing downward pressure due to rising mortgage rates, according to new research from Zoopla. The property website has found that higher mortgage rates are adding to the affordability pressures on buyers, and dragging on house price inflation.

House prices are under downward pressure

Mortgage repayments have increased by 61% since 2021, with the average home buyer taking out a 70% loan-to-value mortgage now facing annual mortgage repayments of £11,400, up from £7,100 three years ago. This increase is driven by higher mortgage rates, which have risen from below 2% in March 2021 to around 4.5% today.

Mortgage rates have risen significantly

However, only two-thirds of this increase is driven by higher mortgage rates, with a third down to the fact that house prices are 13% higher than three years ago. Londoners, where property prices are highest, face the largest increase, of £7,500 per year. Buyers in the South West, South East, and East of England face paying at least £5,000 per year more.

Across other regions and countries of the UK, the increase is lower, at between £2,350 and £3,900 a year. Zoopla’s data also shows that house sales volumes are up 12% year on year, putting the market on track for 1.1m sales in 2024, up 10% on last year. However, prices dipped by 0.2% month-on-month, while almost two-thirds (64%) of all homes are in local markets where prices are lower than a year ago.

House sales are up 12% year on year

Factors including higher mortgage rates and stamp duty are behind ongoing price falls across the south of England, Zoopla reckons. Richard Donnell, executive director at Zoopla, says the market is adjusting to higher borrowing costs; he doesn’t believe prices will start to rise as buyers face much higher mortgage repayments than in the recent past, so sellers should remain realistic.

Richard Donnell, executive director at Zoopla

“The rebound in sales being agreed continues for a fourth month as mortgage rates have fallen, consumer confidence improves and home buyers have much greater choice of homes for sale. The pipeline of sales is growing and we expect 100,000 more people to move home in 2024 than last year,” Donnell said.