Home movers most reliant on borrowing are starting to reduce their budgets in the face of rising interest rates and the increased cost of living, according to research carried out by Savills.

The survey of more than 1,000 prospective buyers undertaken at the end of last month reveals that commitment to move has also fallen, at least in the short-term. The net balance of people who are more committed to move in the next three months has fallen to -1.7%, while a net balance of +7.1% feel more committed to move in the next year – down from +22% in April 2022.

However, sentiment remains more positive for the medium-term, with a net balance of +15% stating that they are more committed to moving in the next two years, which is on par with last Autumn (September 2021).

Those looking to enter the market or extend borrowing are, unsurprisingly the most cautious when asked about commitment to move within the next six months. This caution is most keenly expressed by those looking to upsize (net balance of -10%) and those in the market for more discretionary purchases such as a second home (-31%) or an investment opportunity (-8.7%), Savills said.

But not all buyers are deterred by the tougher economic outlook, with some buyer groups increasingly committed to their moves. Those looking to downsize (+6.6%), relocate (+7.4%) or those who are currently living in regional parts of the UK (+3.9%) are more committed to move over the next six months, according to the research.

Lack of stock also remains an issue. Still, more than half of buyers – 54% – say that a lack of stock is significantly inhibiting their ability to purchase a property. This is only slightly down from 63% in April. This issue is most pronounced at the top end of the market with 88% looking to purchase a property above £1m hindered by a lack of suitable properties.

For the majority of buyers, the amount they plan to spend on their new home has not changed. Most respondents – 54% – said that there would be no effect, and that they plan to use the same source of funding. While 7.8% plan to spend the same overall, but are likely to reduce the amount they borrow for the purchase, dipping deeper into their equity pots to fund their purchase.

However, recent interest rate increases and the higher cost of living have also started to impact buyer budgets in some areas of the market. Almost a third (29%) of prospective buyers surveyed stated that they have reduced their budgets in response to these factors.

This is most true for those more reliant on borrowing – including half – 50% – of those wanting to take the first step onto the property ladder, and 44% of those who are looking to upsize.

Cohorts that reported as being least impacted were downsizers, with two-thirds – 66% – keeping both their budget and funding the same, and those moving outside of London (59%).

“Despite transactions remaining robust over the summer months, there’s now certainly less urgency in the market, with rising costs of debt impinging on the budgets of those most reliant on a mortgage. Increased costs of living are also making buyers much more conscious when it comes to how much they are willing to spend,” comments Frances McDonald, research analyst at Savills.

“Ultimately, in the short term, the market will be predominately driven by homeowner need, rather than lifestyle influences which drove the market during the pandemic. Especially now that lockdowns are fading into distant memory.

“As a result, after more than two years of runaway house price growth, sellers will need to become much more realistic when it comes to pricing their home, especially as more stock comes onto the market.

“As and when inflation has been tamed, the cost of debt eases and we see a pick-up in both domestic and global economic growth, we can expect price growth to return to these markets, particularly given the strength of buyers’ underlying commitment to move over the medium term.”