Estate agents are warning sellers against overpricing their homes as rising mortgage rates squeeze buyers’ budgets and increase competition between properties.
The warning follows Rightmove’s latest House Price Index, which shows average asking prices rose 1% in October to £371,015.
However, prices remain 0.1% below last year, while the average two-year fixed mortgage rate has climbed to 5.55%.
Buyer enquiries are down 9% year-on-year, while sales agreed have fallen 8%. Meanwhile, the number of homes for sale has reached its highest October level since 2014.
Mortgage Rates and House Prices: Current Trends – Property Industry Eye
Industry reaction:
Jeremy Leaf, north London estate agent and a former RICS residential chairman: “It’s been clear in our offices for several months now that the double whammy of expected mortgage rate rises and shocks in the Budget is compromising confidence and activity.
“In such a sensitive market we are finding only sellers who recognise the importance of competitive asking prices are standing out from the crowd and succeeding in finding a buyer.
“Sales are gaining a little more momentum, and few are failing. However, before committing, buyers want to be sure they’re building in sufficient headroom to cover for foreseen, and unforeseen, contingencies, which is making momentum even harder to build.”
Tom Bill, head of UK residential research at Knight Frank: “Prices will continue to be squeezed in the final months of the year as higher mortgage costs due to the Middle East conflict increasingly weigh on buyers. Uncertainty around the familiar list of potential property tax hikes in the Budget is aggravating the situation. The outlook for mortgage rates and the buoyancy of the housing market next year largely hinges on a single overseas geopolitical risk, which is frustrating for UK buyers and sellers but it also means rising borrowing costs would quickly go into reverse if the unpredictable conflict de-escalates or ends.”
Tomer Aboody, founding director of specialist lender MT Finance: “Higher mortgage rates, a pending Budget and the prospect of further taxes – this time on the banks – is creating further uncertainty, lower sales and keeping a lid on values.
“Affordability is key when buying a home, and the current climate – both micro and macro – is creating uncertainty, while inflation is on the rise. Mortgage rates are increasing, which in turn is reducing market activity, as well as prices agreed. Buyers are very aware of what they can afford, and in turn, are making lower bids.”
Michael Donnachie, Director at Michael Anthony Village Estates: “With mortgage rates rising buyers are having to be more considered about what they can afford and what represents good value. That makes getting the asking price right from day one incredibly important.
“You never get a second chance to make a first impression. Price too high and you can quickly lose momentum, particularly in a market where buyers have plenty of choice. Once a property has been sitting on the market for a while, buyers naturally start to question why. You’ve lost that chance to capture your audience; the best price is usually the first price.
“Sellers need to be realistic and listen to the market. An experienced agent will know where buyers are, how to negotiate when issues come up through surveys, and how to keep a sale moving. One thing I’m reminding buyers and sellers of right now, is to focus on, can you afford it and does it fit your needs. The economics of a home buy are important, but for a family home you’re going to spend 20 years in, it’s worth looking longer term and not just at the inevitable ups and downs of the market.”
Nathan Emerson, CEO of Propertymark: “As we head towards the end of the year, it is fair to acknowledge some of the many challenges the housing market has faced. Although inflation has generally tracked downwards, it has yet to reach the desired 2% target that the Bank of England has long aimed for.
“This in turn has contributed to the base rate remaining higher than many would like to see and has influenced the cost and availability of mortgage deals currently on offer. For prospective buyers, this can make it more difficult to establish what is realistically affordable monthly.
“While house price growth has been changeable throughout the year, underlying demand remains, with many consumers waiting for the most opportune moment to consider making a move. Looking ahead, much will likely depend on how inflation, interest rates and mortgage affordability evolve over the coming months and into the new year.”
Marc von Grundherr, director of Benham and Reeves in London: “There’s certainly an element of seasonality at play, with the summer firmly behind us and the London market gearing up for one final push before Christmas. However, we’re also seeing something of an ‘enough is enough’ mentality among London sellers, many of whom recognise that while the market has been subdued this year, London bricks and mortar remain one of the strongest assets they can hold. For these homeowners, selling for anything less than what they consider a reasonable price simply isn’t a sensible move, particularly if they have little urgency to sell.
“There’s also a degree of renewed optimism surrounding the Autumn Budget, with the prospect of further government measures to stimulate the housing market helping to improve sentiment, even if the finer details remain unclear. At the top end of the market, we also have the looming mansion tax to consider. While speculation around reducing the threshold to £1.5m has now been put to bed, owners of properties valued above £2 million still face an additional annual tax from April 2028.
“This could well be encouraging some higher-value London homeowners to bring forward their selling plans, with a greater concentration of these properties coming to market also helping to push the capital’s average asking price higher. Of course, stronger asking prices don’t necessarily translate into stronger achieved prices, and sellers will still need to be realistic if they want to secure a buyer in what remains a relatively price-sensitive market.”
