How are mortgage and interest rate rises impacting house prices?

The Bank of England has increased its base rate 13 times since December 2021, reaching 5%, the highest in 15 years, due to higher-than-expected inflation. As a consequence, mortgage rates have risen, causing some homebuyers to reassess their plans considering the higher costs.

The affordability challenges faced by homebuyers have led some new home sellers to adjust their asking price expectations, leading to a 0.2% decrease in the average home asking price in Great Britain this month, reaching £371,907. Despite this drop, house prices are still 2.6% higher than in January, as demand remains strong, even though the rate rises have impacted the number of home sales agreed upon in June.

Property experts suggest that the base rate rises are starting to affect the housing market. While asking prices and home sales rebounded more strongly than expected this year, sticky inflation figures and surprise mortgage rate increases contributed to the decline in average house prices and sales agreements. However, buyers with higher deposits and lower mortgage requirements continue to show interest in the market, seeking reasonably priced properties.

The uncertainty caused by the rate rises has resulted in some home-movers postponing their plans until mortgage rates stabilize. Nevertheless, a large volume of motivated homebuyers, who can factor in rate rises, are still actively looking for homes. Realistically priced properties are particularly attractive to buyers due to a shortage of properties for sale compared to historical norms. Conversely, homes that need to reduce their asking prices are significantly less likely to find buyers, as initial over-pricing reduces their chances further, given the current market conditions.

For those considering moving, seeking advice from a specialist sales consultant is recommended as they can advise the best way forward to achieve your sale goals.

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